World of Science Inc – ‘PREM14A’ for 9/1/00

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Preliminary Proxy Solicitation Material — Merger or Acquisition   —   Schedule 14A
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: PREM14A     Preliminary Proxy Statement                          157    644K 

Document Table of Contents

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SCHEDULE 14A
(Rule 14a-101)

 INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

Filed by the Registrant  [ ]                                                    
Filed by a Party other than the Registrant  [ ]                                 

Check the appropriate box:                                                      

                                                        [Enlarge/Download Table]

                                                                                                             
[X]  Preliminary Proxy Statement                               [ ] Confidential,  for  Use of the  Commission
                                                                   Only (as permitted by Rule 14a-6(e)(2))   
[ ]  Definitive Proxy Statement                                                                              

[ ]  Definitive Additional Materials                                                                         

[ ]  Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12                                           

WORLD OF SCIENCE, INC.
(Name of Registrant as Specified in its Charter)

WORLD OF SCIENCE, INC.
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):                              

[ ]         No fee required                                                     
[X]         Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and  
0-11.                                                   

          (1)         Title of each class of securities to which transaction
                       applies: Common Stock, par value $.01 per share ("World
of Science Common Stock")       

       (2)         Aggregate number of securities to which transaction
applies: 4,736,105 shares       

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           (3)         Per unit price or other underlying value of transaction
                       computed pursuant to Exchange Act Rule 0-11: The amount
                      on which the filing fee of $1,089.30 is calculated was
                     determined pursuant to Rule 0-11(c) of the Securities
                        Exchange Act, as amended, by multiplying 1/50th of 1% by
                     an amount equal to the product of (x) $1.15, the cash
                      merger consideration per share, and (y) 4,736,105, the
                        number of shares of World of Science Common Stock issued
and outstanding.                

    (4)         Proposed maximum aggregate value of transaction:
$5,446,521.                     

(5)         Total fee paid :  $1,089.30                 

[ ]         Fee paid previously with preliminary materials                      

[ ]         Check box if any part of the fee is offset as provided by Exchange  
            Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
           Registration Statement number, or the Form or Schedule and the date
of its filing.                                          

        (1)         Amount Previously Paid: ____________________________

        (2)         Form, Schedule or Registration Statement No.: ______

        (3)         Filing Party: ______________________________________

        (4)         Date Filed: ________________________________________

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[World of Science Logo]                                                         

WORLD OF SCIENCE, INC.  
900 Jefferson Road, Building Four 
Rochester, New York 14623 

To the stockholders of World of Science, Inc. 

A MERGER PROPOSAL - YOUR VOTE IS VERY IMPORTANT 

  You are cordially invited to attend a special meeting of stockholders of
World of Science, Inc., to be held at [______ a.m./p.m.], local time, on        
___________, 2000, at the [_______________, ____________] Rochester, New York.  

At the special meeting, you will be asked to consider and vote upon a 
proposal to adopt a merger agreement, dated as of August 3, 2000, by and among  
Natural Wonders, Inc., Merger Sub, a wholly-owned subsidiary of Natural Wonders 
to be formed, and World of Science, pursuant to which World of Science will     
become a wholly-owned subsidiary of Natural Wonders and each share of World of  
Science common stock will be converted into a right to receive $1.15 in cash.   
Approval of the proposed merger requires the affirmative vote of the holders of 
at least two-thirds of the outstanding shares of World of Science common stock  
entitled to vote on the merger.                                                 

    Your board of directors has unanimously approved the merger and recommends
that its stockholders vote FOR the merger proposal.                             

   Information about the merger is contained in this proxy statement. I urge
you to read this proxy statement and give it your careful attention.            

If the merger is approved, stockholders will receive appropriate      
instructions for exchanging their stock certificates for cash. Please do not    
send in your stock certificates at this time.                                   

  Your vote is very important, regardless of the number of shares you own.
Whether or not you intend to attend the special meeting, please vote as soon as 
possible to make sure that your shares are represented at the special meeting.  
If you do not vote, it will have the same effect as voting against the merger.  

               [signature]

                   Fred H. Klaucke
                                          President and Chief Executive Officer,
                         Chairman of the Board

   This proxy statement is dated August ___, 2000, and is first being mailed
to stockholders of World of Science on or about August ___, 2000.               

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WORLD OF SCIENCE, INC.  
900 Jefferson Road, Building Four   
Rochester, New York 14623   
(716) 475-0100  

Notice of Special Meeting of World of Science Stockholders  
___________, 2000 at ______ a.m./p.m. 

To The Stockholders Of World Of Science, Inc.:                                  

   NOTICE HEREBY IS GIVEN that a special meeting of stockholders of World of
Science, Inc., a New York corporation, will be held at [______ a.m./p.m.], local
time, on ______________, 2000, at the [______________, _____________],          
Rochester, New York, for the following purposes:                                

1.   To consider and vote upon a proposal to adopt a merger agreement,
dated as of August 3, 2000, by and among Natural Wonders, Inc., Merger Sub, a   
wholly-owned subsidiary of Natural Wonders to be formed, and World of Science,  
pursuant to which World of Science will become a wholly owned subsidiary of     
Natural Wonders and each share of World of Science common stock will be         
converted into a right to receive $1.15 in cash.                                

2.   To transact such other business as may properly come before the  
special meeting or any adjournments or postponements of the special meeting.    

The item of business is described in the attached proxy statement. The
affirmative vote of the holders of at least two-thirds of the outstanding shares
of World of Science common stock entitled to vote on the merger is required for 
adoption of the merger agreement. Holders of record of World of Science common  
stock at the close of business on ______________, 2000, the record date, are    
entitled to notice of, and to vote at, the special meeting and any adjournments 
or postponements of the special meeting.                                        

  Your vote is very important, regardless of the number of shares you own.
Please vote as soon as possible to make sure that your shares are represented at
the meeting. To vote your shares, you may complete and return the enclosed proxy
card. If you are a holder of record, you may also cast your vote in person at   
the special meeting. If your shares are held in an account at a brokerage firm  
or bank, you must instruct them on how to vote your shares. If you do not vote  
or do not instruct your broker or bank how to vote, it will have the same effect
as voting against the merger.                                                   

                           By Order of the Board of Directors of
            World of Science, Inc.

                         ___________________________________
       Richard B. Callen
         Corporate Secretary

Rochester, New York                                                             
August ___________, 2000                                                        

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SUMMARY TERM SHEET  

    This summary highlights selected information from this proxy statement. It
may not contain all of the information that is important to you. We urge you to 
read carefully the proxy statement and the documents attached to this proxy     
statement for a complete understanding of the merger. See "Where You Can Find   
More Information" (page ____). Each item in this summary includes a page        
reference directing you to a more complete description of that item.            

                                                        [Enlarge/Download Table]
                                                                                                  
The Parties to the Merger (see page ____)          interactive toys and games. Natural Wonders'   
                                                   target customers are predominately well        
World of Science, Inc.                             educated, middle income families (adults ages  
900 Jefferson Road, Building Four                  25 and up and children ages 6 to 12). As of    
Rochester, New York 14623                          the date of this proxy statement, Natural      
(716) 475-0100                                     Wonders operated 177 retail stores in 39       
                                                   states. A copy of Natural Wonders' 1999        
     World of Science, Inc., a New York            Annual Report to Stockholders and its          
corporation, is a specialty retailer of a variety  Quarterly Report on Form 10-Q for the quarter  
of traditional and distinctive science and         ended April 29, 2000 are included in this      
nature products. Its stores typically include      proxy statement as Annex D and Annex G,        
products from 25 different merchandise             respectively.                                  
categories, including anatomy (anatomical                                                         
models, charts and books), astronomy               Merger Sub                                     
(telescopes, solar system models), dinosaurs,      4209 Technology Drive                          
geography, geology (mineral and fossil             Fremont, California 94538                      
collectibles), physics and puzzles and games.      (510) 252-9600                                 
World of Science has a broad customer base,                                                       
as its products appeal to customers of all ages         Merger Sub will be a wholly-owned         
for gift-giving, educational use and               subsidiary of Natural Wonders, formed as a     
entertainment. The Company operates both a         corporation under the laws of the State of New 
permanent and seasonal store format. At the        York, for the specific purpose of being merged 
date of this proxy statement, World of Science     with and into World of Science in order to     
operated [85] permanent stores and [217]           facilitate the merger.                         
seasonal stores in 25 states. In addition to its                                                  
traditional retail stores, World of Science        Special Meeting (see page ___)                 
operates an e-commerce retail site, through its                                                   
wholly-owned subsidiary, WOSI on the Web,               The special meeting of World of Science   
Inc., which is a New York corporation.             stockholders will be held on _______________,  
                                                   2000 at [___________a.m./p.m.], local time, at 
Natural Wonders, Inc.                              the [________________, ________________]       
4209 Technology Drive                              Rochester, New York.                           
Fremont, California 94538                                                                         
(510) 252-9600                                     Record Date; Vote Required (see page ____)     

     Natural Wonders, Inc., a Delaware                  You can vote at the special meeting if you
corporation, is a specialty gift retailer of       owned common stock of World of Science at      
unique and affordable family gifts inspired by     the close of business on ______________, 2000, 
the wonders of science and nature. Its             the record date. On that date, there were      
merchandise assortment includes telescopes,        [_____________________] shares of common stock 
mineral carvings, globes, home and garden          outstanding and entitled to vote. To adopt the 
items, ceramics, wind chimes, hats and shirts,     merger agreement, the holders of two-thirds of 
books, tapes, cd's, videos and a variety of        those shares must vote in favor of doing so.   

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You may cast one vote for each share of               General.                                    
common stock that you owned on                                                                    
______________, 2000.                                 We propose a merger in which a wholly-      
                                                 owned subsidiary of Natural Wonders will         
A failure to vote, either by not returning the   merge with and into World of Science. When       
enclosed proxy card or by checking the           the merger is complete, each share of World      
"Abstain" box on the proxy card, or a failure    of Science common stock (other than shares       
to instruct your broker to vote if your shares   owned by Natural Wonders, Merger Sub or          
are held in an account at a brokerage firm or    World of Science) will automatically convert     
bank will have the same effect as a vote         into the right to receive cash in the amount of  
against the merger. Accordingly, the board of    $1.15, without interest.                         
directors of World of Science urges you to                                                        
complete, date and sign the accompanying              Opinion of Financial Advisor (see page ____)
proxy card and return it promptly in the                                                          
enclosed, postage paid envelope.                      In deciding to approve the merger and the   
                                                 merger agreement, World of Science's board       
Voting by Directors and Executive Officers       of directors considered the opinion of its       
(see page ____)                                  financial advisor, Raymond James &               
                                                 Associates, Inc., that, as of August 3, 2000,    
     As of _______________, 2000, directors and  the cash consideration to be received in the     
executive officers of World of Science held, as  merger was fair from a financial point of view   
a group, approximately [2,048,275] shares        to the holders of World of Science common        
(excluding outstanding but unexercised           stock. The full text of this opinion is attached 
options to purchase shares of common stock),     as Annex B. You should read the opinion          
representing approximately [43.25%] of           completely to understand the assumptions         
common stock entitled to vote at the special     made, matters considered and limitations of      
meeting. All of the directors of World of        the review undertaken by Raymond James &         
Science have signed a voting agreement under     Associates in providing its opinion.             
which they have agreed to vote all shares of                                                      
common stock held by them in favor of the             Effective Time (see page ____).             
merger.                                                                                           
                                                      The merger will occur after all of the      
Recommendation of the Board of Directors         conditions to the completion of the merger       
and Reasons for the Merger (see page ____)       have been satisfied or waived in accordance      
                                                 with the merger agreement. The merger will       
     The board of directors of World of          become effective when a certificate of merger    
Science believes that the merger is fair to you  is filed by the New York Department of State,    
and in your best interest, and unanimously       the effective time. We expect to complete the    
voted to approve the merger agreement and        merger during the third calendar quarter of      
unanimously recommends that you vote             2000.                                            
"FOR" the approval of the merger agreement.                                                       
                                                 Exchange of Certificates (see page ____).        
The Merger (see page ____)                                                                        
                                                 Pursuant to the merger agreement,                
     The merger agreement is attached to this    immediately prior to the effective time,         
document as Annex A. Please read the merger      Natural Wonders will deposit, or will cause      
agreement. It is the legal document that         the Merger Sub to deposit, with American         
governs the merger.                              Stock Transfer & Trust Company, the              
                                                 disbursing agent, the amount of cash equal to    
                                                 the product of $1.15 multiplied by the shares    
                                                 of World of Science common stock                 

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outstanding immediately prior to the effective     .    holders of the requisite number of shares  
time, other than shares held by World of           of World of Science common stock must have      
Science, Natural Wonders and Merger Sub.           approved the merger agreement;                  
Promptly after the effective time, the                                                             
disbursing agent will send to each stockholder     .    there must have been no material adverse   
of record immediately prior to the effective       change in the prospects, financial condition or 
time, a letter of transmittal and detailed         results of operations of World of Science since 
instructions specifying the procedures to be       January 29, 2000; and                           
followed in surrendering certificates. Share                                                       
certificates should not be forwarded to the        .    neither company shall have breached its    
disbursing agent until receipt of the letter       representations, warranties or covenants in the 
of transmittal. Upon the surrender of a share      merger agreement.                               
certificate, the disbursing agent will issue to                                                    
the surrendering holder $1.15 in cash, without          Interests of Directors and Officers in the 
interest, the merger consideration.                Merger (see page ____)                          

     Treatment of Outstanding Options (see                                                         
page ____)                                              You should be aware that certain directors 
                                                   and executive officers of World of Science      
     The merger agreement requires World of        have interests in the merger that are different 
Science to cancel all outstanding options to       from, or in addition to, the interests of World 
purchase World of Science common stock,            of Science's stockholders. Among other          
whether vested or unvested, and convert the        things, certain executives will have their      
options into the right to received cash in an      existing employment and compensation            
amount equal to the difference between the         agreements assumed, and the severance           
merger consideration and the exercise price        benefits under those agreements paid, by        
with respect to the options, multiplied by the     Natural Wonders. These executive officers of    
number of shares covered by the option. For        World of Science may enter into new             
example, if you hold an option to purchase         agreements or arrangements with respect to      
100 shares of World of Science at an exercise      employment with Natural Wonders or World        
price of $1.00 per share, you will be entitled to  of Science, as the surviving corporation.       
receive $15.                                                                                       
                                                        Termination of the Merger Agreement;       
     Conditions to the Completion of the           (see page ____)                                 
Merger (see page ____)                                                                             
                                                        The merger agreement contains provisions   
     World of Science and Natural Wonders               addressing the circumstances under which   
will complete the merger only if they satisfy      World of Science or Natural Wonders may         
or, in some cases waive, several conditions,       terminate the merger agreement. Either          
including the following:                           company may terminate the merger                
                                                   agreement:                                      
 .    Natural Wonders shall have obtained the                                                      
necessary financing to pay the merger              .    if Natural Wonders has not obtained        
consideration. As more fully discussed in               financing sufficient to consummate the     
"The Merger - Lack of Financing Sufficient to           merger prior to August 25, 2000;           
Complete the Merger", Natural Wonders does                                                         
not currently have firm commitment letters         .    if the merger is not completed on or before
from its financing sources;                             October 2, 2000 (unless extended by the    
                                                        mutual consent of the parties), so long as 
                                                        the terminating company is not in breach   
                                                        under the merger agreement;                

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 .    if the World of Science stockholders do        Stockholders desiring to exercise their             
     not approve the merger; or                     appraisal rights will have the rights and duties     
                                                    and must follow the procedures set forth in          
 .    if the other company breaches its              Section 623 of the New York Business                
     representations, warranties or covenants in    Corporation Law, the full text of Section 623        
     the merger agreement in a material way.        is attached to this proxy statement as Annex         
                                                    C. Stockholders who wish to exercise                 
     In addition, World of Science can              appraisal rights must carefully follow the           
terminate the agreement in the event its board      procedures described in Section 623 and are          
of directors determines, consistent with its        urged to read Annex C in its entirety.               
fiduciary obligations, to accept an unsolicited                                                          
third party offer.                                  Certain Federal Income Tax Consequences              
                                                    (see page __)                                        
     "No Solicitation" (see page __).                                                                    
                                                         Your exchange of shares of common stock         
     The merger agreement prohibits World of        for cash pursuant to the merger will be a            
Science, WOSI on the Web, or any of their           taxable transaction for federal income tax           
respective officers, directors, employees,          purposes. You will recognize gain or loss for        
agents and representatives, from taking any         federal income tax purposes equal to the             
action to initiate or solicit a proposal for the    difference between the amount of cash you            
acquisition of World of Science or WOSI on          receive for your shares and your tax basis in        
the Web. The merger agreement does not,             the shares surrendered, assuming that you do         
however, prohibit World of Science or its           not have a special tax status or did not acquire     
board of directors from considering, and            your shares pursuant to an incentive stock           
potentially accepting, an unsolicited               option or special compensation arrangement.          
acquisition proposal from a third party.                                                                 
                                                    Determining the actual tax consequences of           
     Break-up Fee (see page __)                     the merger to you may be complex. They will          
                                                    depend on your specific situation and on             
     In the event World of Science violates the     variables not within our control. You should         
no solicitation prohibition contained in the        consult your own tax advisor for a full              
merger agreement, or closes an acquisition          understanding of the merger's tax                    
transaction arising from an unsolicited third       consequences.                                        
party offer, World of Science must pay Natural                                                           
Wonders a $150,000 break-up fee.                    Voting Agreements (see page __)                      

     Expenses (see page __)                              Natural Wonders has entered into a voting       
                                                    agreement with each of the directors of World        
     Natural Wonders has reimbursed World of        of Science pursuant to which these World of          
Science for documented costs and expenses in        Science stockholders have agreed to of their         
vote all the amount of  $400,000.  Except for that  shares of World of Science common stock in favor     
reimbursement, World of Science and Natural         of the adoption of the merger agreement.  As         
Wonders will each bear its own expenses in          of the record date, these stockholders owned shares  
connection with the merger.                         representing approximately 43.25% of the voting power
                                                    of World of Science capital stock entitled to vote   
Appraisal Rights of Dissenting                      at the World Science special meeting.                
Stockholders (see page __)                                                                               

     Under New York law, World of Science                                                                
stockholders who do not vote in favor of the                                                             
merger will be entitled to exercise appraisal                                                            
rights in connection with the merger.                                                                    

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TABLE OF CONTENTS 

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                                                                                          Page
                                                                                          ----
                                                                                              
SUMMARY TERM SHEET.......................................................................   1 

  The Parties to the Merger..............................................................   1 
  Special Meeting........................................................................   1 
  Record Date; Vote Required.............................................................   1 
  Voting By Directors and Executive Officers.............................................   2 
  Recommendation of the Board of Directors and Reasons for the Merger....................   2 
  The Merger.............................................................................   2 
  Appraisal Rights of Dissenting Stockholders............................................   4 
  Certain Federal Income Tax Consequences................................................   4 
  Voting Agreement.......................................................................   4 

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING...........................   7 

  THE SPECIAL MEETING....................................................................  11 
  Proxy Statement........................................................................  11 
  Date, Time and Place of Special Meeting................................................  11 
  Purpose of the Special Meeting.........................................................  11 
  Recommendation of the Board of Directors...............................................  11 
  Stockholder Record Date for the Special Meeting........................................  11 
  Vote Required for Adoption of the Merger Agreement.....................................  11 
  Proxies................................................................................  12 
  Solicitation of Proxies................................................................  13 

THE MERGER...............................................................................  13 

  General................................................................................  13 
  Background of the Merger...............................................................  14 
  Recommendation of the Board of Directors and Reasons for the Merger....................  18 
  Opinion of Financial Advisor...........................................................  19 
  Interests of Certain Directors and Executive Officers in the Merger....................  25 
  Lack of Financing Sufficient to Complete the Merger....................................  27 
  Completion and Effectiveness of the Merger.............................................  28 
  Structure of the Merger................................................................  28 
  Payment for Shares; Disbursing Agent...................................................  28 
  Dissenters' Rights.....................................................................  29 
  Regulatory Matters.....................................................................  31 
  The Merger Agreement...................................................................  32 
  Voting Agreement.......................................................................  39 
  Certain Federal Income Tax Consequences of the Merger..................................  39 
  Accounting Treatment of the Merger.....................................................  40 

PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT..............................  40 

STOCKHOLDER PROPOSALS....................................................................  41 

OTHER MATTERS............................................................................  41 

WHERE YOU CAN FIND MORE INFORMATION......................................................  42 

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FORWARD-LOOKING STATEMENTS...............................................................43

ANNEXES                                                                                    
     Annex A - Agreement and Plan of Merger                                                
     Annex B - Opinion of Financial Advisor                                                
     Annex C - Section 623 of the New York Business Corporation Law                        
     Annex D - 1999 Annual Report to Stockholders of Natural Wonders, Inc.                 
     Annex E - Annual Report on Form 10-K for the year ended January 29, 2000 of           
               Natural Wonders, Inc.                                                       
     Annex F - Report on Form 8-K dated June 8, 2000 of Natural Wonders, Inc.              
     Annex G - Quarterly Report on Form 10-Q for the first quarter ended April             
               29, 2000 of Natural Wonders, Inc.                                           

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QUESTIONS AND ANSWERS ABOUT THE MERGER  
AND THE SPECIAL MEETING 

Q:   Is the financial condition of Natural Wonders relevant to my decision on   
how to vote or for any other reason?                                            

A:   A condition to the completion of the merger is that Natural Wonders        
deposit, or cause to be deposited, with the disbursing agent an amount of cash  
equal to the aggregate merger consideration. If Natural Wonders is not able to  
fulfill this condition the merger will not occur. However, once your shares of  
World of Science common stock are purchased you will no longer have an          
investment in the company that survives as a result of the merger.              

Q:   Does Natural Wonders have the resources to pay the full cash price for all 
of the outstanding shares?                                                      

A:   No. Natural Wonders does not currently have the funds necessary to complete
the merger transaction in accordance with the terms of the merger agreement,    
including the payment of the merger consideration. Natural Wonders has executed 
financing term sheets with two financial institutions. The term sheets are not  
binding and do not evidence a commitment to extend credit.                      

    Although Natural Wonders has advised World of Science's board of directors
that the proposed financing terms with the two institutional lenders are        
acceptable, there can be no assurances that Natural Wonders will, in fact, close
the financing transactions with these lenders and, if not, that Natural Wonders 
will be able to secure financing in an amount sufficient to complete the merger 
or on acceptable terms. The closings of the financings are subject to, among    
other things, Natural Wonders' securing $1.25 million of additional subordinated
debt or equity beyond amounts proposed from the financial institutionals the    
satisfactory completion of due diligence by the lenders, and the absence of any 
material adverse change in the financial condition, business, profitability,    
assets or operations of Natural Wonders. Natural Wonders has indicated to World 
of Science that certain principals of Natural Wonders are prepared to provide   
financing to Natural Wonders in the amount of $550,000, and that the financial  
advisers of both Natural Wonders and World of Science have each agreed to defer 
a portion of their fees in consideration of a promissory note and warrants.     

Q:   What will happen if Natural Wonders is unable to secure the financing      
necessary for it to pay the merger consideration?                               

A:   The merger agreement provides that in the event Natural Wonders does not   
remove the contingency to closing the merger transaction due to the lack of     
adequate financing by August 25, 2000, either World of Science of Natural       
Wonders may terminate the merger agreements.                                    

Q:   What will happen to the outstanding shares of World of Science common      
stock?                                                                          

A:   If the merger occurs, each stockholder of World of Science will receive    
$1.15 in cash, the merger consideration, without interest, for each share of    
common stock held by that stockholder.                                          

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Q:   Will World of Science continue to exist following the merger?              

A:   World of Science will be the surviving corporation in the merger, and will 
operate as a wholly-owned subsidiary of Natural Wonders. You will have no       
further interest in World of Science after completion of the merger.            

Q:   Does World of Science's board of directors recommend approval of the       
merger?                                                                         

A:   Yes. The board of directors of World of Science has approved the merger and
unanimously recommends that World of Science stockholders vote in favor of the  
merger. In addition, each of the directors of World of Science has entered into 
a voting agreement with Natural Wonders to vote his shares of common stock in   
favor of the merger.                                                            

Q:   Is the proposed merger a taxable transaction?                              

A:   Yes. The acquisition of your shares for cash consideration is a taxable    
transaction and may result in tax liability. You should consult your own tax    
advisor to determine the tax consequences of the transaction.                   

Q:   What needs to happen in order for the merger to occur?                     

A:   Natural Wonders must secure the financing necessary to pay the merger      
consideration. Moreover, the merger cannot occur unless holders of World of     
Science common stock representing at least two-thirds of all outstanding shares 
entitled to vote on the merger vote in favor of the merger and the necessary    
third-party consents are obtained.                                              

Q:   When do you expect the merger to be completed?                             

A:   We expect to complete the merger during the third calendar quarter of 2000.
However, because the merger is subject to third-party consents and Natural      
Wonders' securing the necessary financing to pay the merger consideration, we   
cannot predict the exact timing.                                                

Q:   Is the merger fair to World of Science stockholders?                       

A:   Raymond James & Associates has issued a written fairness opinion dated as  
of August 4, 2000, stating that, as of August 3, 2000, the amount which will be 
paid to World of Science stockholders in the merger is fair from a financial    
point of view.                                                                  

Q:   Should I send in my stock certificates now?                                

A:   No. After completion of the merger, Natural Wonders will send instructions 
to World of Science stockholders whose shares are being purchased in the merger.
These instructions will explain how to submit your World of Science stock       
certificates for payment of the merger consideration.                           

Q:   How do I vote?                                                             

A:   After carefully reading and considering the information contained in this  
proxy statement, please respond by completing, signing and dating your proxy    
card and returning it in the enclosed                                           

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postage paid envelope as soon as possible so that your shares may be represented
at the special meeting.                                                         

Q:   What if I don't vote?                                                      

A:   .    If you fail to respond, it will have the same effect as a vote against
the merger.                                                 

  .    If you respond and do not indicate how you want to vote, your proxy
will be counted as a vote in favor of the merger.           

    .    If you respond and abstain from voting, your proxy will have the same
effect as a vote against the merger.                        

Q:   If my shares are held in an account at a brokerage firm or bank, will the  
broker or bank vote the shares for me?                                          

A:   Not unless you instruct your broker or bank to vote your shares, following 
the directions provided to you by your broker. A failure to instruct your broker
or bank to vote your shares in favor of adoption of the merger is the equivalent
of a vote against the merger.                                                   

Q:   Can I change my vote after I have delivered my proxy?                      

A:   Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can revoke    
your proxy. Second, you can submit a new proxy. If you choose either of these   
two methods, you must submit your notice of revocation or your new proxy to the 
secretary of World of Science before the special meeting. If your shares are    
held in an account at a brokerage firm or bank, you should contact your         
brokerage firm or bank to change your vote. Third, if you are a holder of       
record, you can attend the special meeting and vote in person.                  

Q:   Do I have appraisal rights?                                                

A:   Yes. You will be entitled to appraisal rights. We describe the procedures  
for exercising appraisal rights in this proxy statement and we have attached the
provisions of New York law that govern appraisal rights as Annex C.             

Q:   Do the directors and officers of World of Science have an interest in the  
merger?                                                                         

A:   Yes. Natural Wonders has agreed to assume, and pay the severance benefits  
under, Mr. Klaucke's employment agreement and the compensation agreements of    
Charles Callahan, World of Science's chief financial officer, vice president of 
finance and assistant secretary, and Christine Luchi, World of Science's vice   
president of operations. In addition, World of Science, as the surviving        
corporation after the merger, or Natural Wonders, will provide indemnity and    
liability insurance to the current officers and directors of World of Science.  

   Thomas James, a director of World of Science is the chairman of the board
of directors and chief executive officer of Raymond James & Associates, World of
Science's financial advisor. World of Science has paid Raymond James &          
Associates a retainer fee of $50,000. Raymond James & Associates is entitled to 
additional aggregate fees in the amount of $400,000, of that amount $150,000 was
payable at the time it issued its fairness opinion to World of Science's board  
of directors and $250,000 is payable at the closing of the merger. Raymond James
& Associates has agreed to defer payment of the $250,000 portion of its fee in  
consideration                                                                   

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of a promissory note and warrants to purchase shares of Natural Wonders' common 
stock.                                                                          

Q:   Is World of Science subject to any restrictions pending the merger?        

A:   In general, World of Science has agreed that it will not seek or encourage 
a competing transaction to acquire World of Science or its subsidiary, WOSI on  
the Web, except in very limited situations in which an unsolicited offer is     
made. World of Science has agreed to conduct its business in the ordinary and   
usual course, subject to certain restrictions, pending the merger. Additionally,
World of Science has agreed to provide Natural Wonders with access to certain   
operating information and, upon the occurrence of specified events,             
World of Science has agreed to permit Natural Wonders to place some of its      
employees at World of Science's offices in Rochester, New York to oversee World 
of Science's inventory decisions and to coordinate the shipment of merchandise. 

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THE SPECIAL MEETING 

Proxy Statement                                                                 

    This proxy statement is being furnished by World of Science to the holders
of outstanding shares of its common stock, par value $.01 per share, in         
connection with the solicitation of proxies by World of Science's board of      
directors in connection with the proposed merger.                               

   This proxy statement is first being furnished to stockholders of World of
Science on or about ____________, 2000.                                         

Date, Time and Place of Special Meeting                                         

   The special meeting of the stockholders of World of Science is to be held
at the [___________, _____________], Rochester, New York at [_______ a.m./p.m.],
local time, on _____________, 2000, and any adjournments or postponements of the
special meeting. Holders of common stock are entitled to one vote for each share
held by them.                                                                   

Purpose of the Special Meeting                                                  

The special meeting is being held so that the stockholders of World of
Science may consider and vote upon a proposal to adopt a merger agreement, dated
as of August 3, 2000, among Natural Wonders, Merger Sub, a wholly-owned         
subsidiary of Natural Wonders to be formed, and World of Science, providing for 
the merger of Merger Sub with and into World of Science. In the merger, each    
outstanding share of World of Science common stock (other than shares owned by  
Natural Wonders, Merger Sub or World of Science) will be converted into the     
right to receive a cash payment of $1.15, without interest.                     

Recommendation of the Board of Directors                                        

The board of directors of World of Science has unanimously adopted the
merger agreement and has determined that the merger is fair and in the best     
interests of World of Science and its stockholders. Accordingly, the board of   
directors of World of Science unanimously recommends that World of Science's    
stockholders vote "FOR" adoption of the merger agreement.                       

Stockholder Record Date for the Special Meeting                                 

    The board of directors of World of Science has fixed the close of business
on ________, 2000 as the record date for the determination of stockholders      
entitled to notice of and to vote at the special meeting. Only holders of record
of shares of common stock at the close of business on the record date will be   
entitled to notice of and to vote at the special meeting. On the record date,   
there were ________ shares of World of Science stock outstanding, held by       
approximately _______ holders of record.                                        

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Vote Required for Adoption of the Merger Agreement                              

The presence, either in person or by properly executed proxy, of the  
holders of a majority of the outstanding shares of World of Science common stock
entitled to vote at the special meeting is required to constitute a quorum at   
the special meeting.                                                            

     The affirmative vote of the holders of two-thirds of the outstanding shares
of World of Science common stock entitled to vote on the merger is required to  
adopt the merger agreement.                                                     

     At the special meeting, each stockholder of World of Science is entitled to
one vote for each share of common stock held in that stockholder's name on the  
record date. The directors and executive officers of World of Science have      
agreed to vote each share of common stock beneficially owned by them in favor of
adoption of the merger agreement and the transactions contemplated thereby. As  
of the record date, the directors and executive officers as a group were the    
beneficial owners of an aggregate of 2,048,275 shares of common stock (excluding
outstanding but unexercised options to purchase common stock), constituting     
approximately 43.25% of the shares of common stock outstanding on the record    
date.                                                                           

Proxies                                                                         

All shares of World of Science common stock represented by properly   
executed proxies received before or at the World of Science special meeting     
will, unless the proxies are revoked, be voted in accordance with the           
instructions indicated on those proxies. If no instructions are indicated on a  
properly executed proxy card, the shares will be voted FOR adoption of the      
merger agreement. You are urged to mark the box on the proxy card to indicate   
how to vote your shares.                                                        

If a properly executed proxy card is returned and the stockholder has 
abstained from voting on adoption of the merger agreement, the World of Science 
common stock represented by the proxy will be considered present at the special 
meeting for purposes of determining a quorum, but will not be considered to have
been voted in favor of adoption of the merger agreement. If your shares are held
in an account at a brokerage firm or bank, you must instruct them on how to vote
your shares. If an executed proxy card is returned by a broker or bank holding  
shares which indicates that the broker or bank does not have discretionary      
authority to vote on adoption of the merger agreement, the shares will be       
considered present at the meeting for purposes of determining the presence of a 
quorum, but will not be considered to have been voted in favor of adoption of   
the merger agreement. Your broker or bank will vote your shares only if you     
provide instructions on how to vote by following the information provided to you
by your broker.                                                                 

   Because adoption of the merger agreement requires the affirmative vote of
at least two-thirds of the shares of World of Science's common stock outstanding
on the record date, abstentions, failures to vote and broker non-votes will have
the same effect as a vote against adoption of the merger agreement.             

     The World of Science special meeting may be adjourned or postponed in order
to permit further solicitation of proxies. No proxy voted against the proposal  
to adopt the merger agreement will be voted on any proposal to adjourn or       
postpone the special meeting that is submitted to the stockholders for a vote.  

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     World of Science does not expect that any matter other than adoption of the
merger agreement will be brought before the special meeting. If, however, other 
matters are properly presented, the persons named as proxies will vote in       
accordance with the direction of a majority of the board of directors with      
respect to those matters, unless authority to do so is withheld on the proxy    
card.                                                                           

  A stockholder may revoke his or her proxy at any time before it is voted
by:                                                                             

     .    notifying in writing the Corporate Secretary of World of Science, Inc.
          at 900 Jefferson Road, Building Four, Rochester, New York 14623 of his
or her intention to revoke;                                 

.    granting a subsequently dated proxy; or                          

 .    appearing in person and voting at the special meeting if you are a
holder of record.                                           

Attendance at the special meeting will not in and of itself constitute
revocation of a proxy.                                                          

Solicitation of Proxies                                                         

 This solicitation of proxies is being made by the board of directors of
World of Science. All expenses associated with soliciting proxies, including the
preparation, assembly, printing and mailing of this proxy statement, will be    
borne by World of Science. It is contemplated that proxies will be solicited    
principally through the use of the mail, but officers, directors and employees  
of World of Science may solicit proxies personally or by telephone. No          
additional compensation will be paid to directors, officers or employees for    
such solicitation. World of Science has retained ________________ to aid in the 
solicitation of proxies, including from brokers, bank nominees, and other       
institutional owners, for a fee (including expenses) of approximately $_______. 
In addition, World of Science will reimburse banks, brokerage houses, and other 
custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses
in forwarding these proxy materials to their principals.                        

You should not send in any stock certificates with your proxy card. A 
transmittal letter with instructions for the surrender of stock certificates    
will be mailed to you as soon as practicable after completion of the merger.    

THE MERGER  

This section of the proxy statement describes material aspects of the 
proposed merger, including the merger agreement and the voting agreement. While 
we believe that the description covers the material terms of the merger, this   
summary may not contain all of the information that is important to you. You    
should read this entire proxy statement and the other documents we refer to     
carefully for a more complete understanding of the merger.                      

General                                                                         

    Under the merger agreement, at the time the merger becomes effective, each
outstanding share of World of Science common stock, other than shares owned by  
Natural Wonders, Merger Sub or World of Science, will be converted automatically
into the right to receive the merger                                            

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consideration, of $1.15 per share. Additionally, all outstanding options to     
purchase common stock, whether vested or unvested, will be canceled and will be 
converted into the right to receive cash in an amount equal to the merger       
consideration less the exercise price with respect to those options, multiplied 
by the number of shares covered by those options. As a result of the merger,    
holders of common stock will cease to have an equity or other interest in, or   
possess any rights as stockholders of, World of Science.                        

Background of the Merger                                                        

  Since November 1999, Fred Klaucke and representatives of Natural Wonders
have had periodic, informal conversations regarding a potential business        
combination between the two companies. In November 1999, Fred Klaucke contacted 
Peter Hanelt, president, chief executive officer and chief financial officer of 
Natural Wonders, by telephone to discuss, among other things, the softening of  
the specialty retail industry and the impending LearningSmith bankruptcy. Fred  
Klaucke and Peter Hanelt also discussed generally the benefits that might be    
associated with a combination of Natural Wonders and World of Science. In       
December 1999, Fred Klaucke and Peter Hanelt determined that it would be        
mutually beneficial to meet and discuss, on a more formal basis, the possibility
of combining the two companies.                                                 

In connection with these initial discussions, the companies began     
consulting with various financial and legal advisors about issues associated    
with transactions of the kind discussed. World of Science discussed these       
matters with its counsel, Harris Beach & Wilcox, LLP and with Raymond James &   
Associates, the financial advisor it subsequently retained for these purposes.  
Natural Wonders retained Renaissance Capital Group as its financial advisor and 
Sheppard, Mullin, Richter & Hampton, LLP, as its legal counsel. The parties     
consulted with their advisors at the outset of discussions and these            
consultations continued throughout the remaining merger discussions.            

In contemplation of an upcoming meeting between Fred Klaucke and Peter
Hanelt, World of Science's board of directors determined that World of Science  
and Natural Wonders should enter into a confidentiality agreement prior to the  
meeting, which they did on December 16, 1999. The board of directors also       
approved the retention of Raymond James & Associates to assist it in discussions
with Natural Wonders, as well as to explore and evaluate other opportunities    
that may be available to World of Science to enhance stockholder value through a
possible strategic transaction with a third party.                              

     On January 3, 2000, World of Science retained Raymond James & Associates to
act as its financial advisor. The board of directors of World of Science        
instructed Raymond James & Associates to explore various investment and         
acquisition alternatives designed to maximize shareholder value.                

The board of directors of World of Science placed no restrictions on  
Raymond James & Associates with respect to contacting potential candidates that 
Raymond James & Associates might identify as parties with whom World of Science 
might engage in a transaction that would accomplish the objectives of World of  
Science - to maximize stockholder value. During the period from January 3, 2000 
through May 23, 2000, Raymond James & Associates engaged in discussions         
with 18 potential candidates that were identified as possible transaction       
partners.                                                                       

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   On January 10, 2000, Peter Hanelt met with Fred Klaucke, Charles Callahan
and a representative of Raymond James & Associates at World of Science's offices
in Rochester, New York. At that meeting the parties exchanged selected          
information and discussed the strategic benefits of a possible transaction and  
the possible synergies and opportunities that might be realized by combining    
World of Science and Natural Wonders, as well as steps in the process towards a 
possible transaction.                                                           

     On March 13, 2000, Charles Callahan and a representative of Raymond James &
Associates met with Peter Hanelt, other representatives of Natural Wonders, and 
a representative of Renaissance Capital Group, Natural Wonders' financial       
advisor, at Natural Wonders' offices in Fremont, California. At that meeting,   
Raymond James & Associates presented information concerning the valuation of    
World of Science and collected additional information about Natural Wonders'    
business operations to better refine its assumptions.                           

  At a telephonic meeting of the board of directors of World of Science on
April 21, 2000, a representative of Raymond James & Associates presented a      
report concerning its progress and dealings with potential transaction partners,
including the current status of discussions with Natural Wonders. At that       
meeting the representative of Raymond James & Associates also provided the board
of directors with a summary of its financial analysis related to any proposed   
transaction. The board of directors authorized the representative of Raymond    
James & Associates to continue discussions with Natural Wonders about a possible
transaction between the two companies, including a transaction involving a      
consideration consisting of the common stock of Natural Wonders or other equity 
securities.                                                                     

   On April 25, 2000 and April 26, 2000, Peter Hanelt, other representatives
of Natural Wonders, and a representative of Renaissance Capital, and Fred       
Klaucke, Charles Callahan and a representative of Raymond James & Associates met
at World of Science's offices. The purpose of the meetings was to provide       
Natural Wonders with an opportunity to acquire detailed information about World 
of Science, its business, financial condition and operations. Natural Wonders   
requested this information so that it could refine its valuation of World of    
Science for purposes of preparing and submitting an offer to World of Science to
combine the two companies. At this meeting, and in telephone calls between      
Raymond James & Associates and Renaissance Capital, the representative of       
Renaissance Capital communicated the preference of Natural Wonders' board of    
directors not to use its common stock or other equity-linked securities as      
consideration in an acquisition transaction by Natural Wonders.                 

   On May 10, 2000, Natural Wonders submitted a proposed, non-binding letter
of intent to World of Science for its consideration. The terms of the letter of 
intent included an offer to purchase all of the outstanding common stock of     
World of Science at a purchase price not to exceed $7.0 million in cash, subject
to possible reduction related to specified examinations. Over the next several  
days, World of Science's management team, together with representatives of      
Harris Beach & Wilcox, LLP and Raymond James & Associates discussed various     
terms and provisions of the letter of intent, and negotiated the terms of the   
letter of intent with Renaissance Capital and Sheppard, Mullin, Richter &       
Hampton LLP.                                                                    

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    On May 23, 2000, the board of directors of World of Science met to discuss
the terms of a non-binding letter of intent presented to World of Science for   
signature. During that meeting the board of directors discussed in great detail 
Natural Wonders' proposal to acquire all of the issued and outstanding shares of
World of Science for $1.32 in cash per share, as well as alternative strategies 
available to World of Science. Representatives of Raymond James & Associates and
Harris Beach & Wilcox, LLP attended the meeting to review with the board its    
fiduciary duties in considering a merger transaction, the potential financial   
and strategic benefits of the proposed transaction, financial valuation         
analyses, and the terms and conditions of the Natural Wonders' proposal. The    
board unanimously concluded, after extensive deliberation and discussion and    
consultation with their legal and financial advisors, as to the financial and   
legal impact of such a cash offer, that the Natural Wonders offer represented   
value to the World of Science stockholders that could not be obtained through   
any other strategy. At the conclusion of that meeting, the board of directors of
World of Science unanimously authorized World of Science's management to enter  
into the letter of intent and, in the afternoon of May 23, 2000, the parties    
executed the letter of intent and issued a joint press release announcing the   
execution of the letter of intent.                                              

During the next several weeks Natural Wonders and World of Science    
exchanged draft merger agreements, delivered various due diligence items and    
draft disclosure schedules. Throughout this time, representatives of Natural    
Wonders met with various potential financing sources.                           

From June 9, 2000 to June 16, 2000 Peter Hanelt, together with other  
Natural Wonders' representatives conducted due diligence examinations at World  
of Science's headquarters in Rochester, New York.                               

     On June 30, 2000, the letter of intent between Natural Wonders and World of
Science expired. World of Science's management team, board of directors and its 
legal and financial advisors discussed, both internally, as well as with        
representatives of Renaissance Capital and Sheppard, Mullin, Richter & Hampton, 
the status of Natural Wonders' on-going efforts to secure financing. Both       
companies decided to continue negotiations, and Natural Wonders continued to    
seek the financing necessary to complete the transaction and to accommodate the 
ongoing operations of the combined companies.                                   

   On July 17, 2000, Renaissance Capital notified Raymond James & Associates
that, after numerous discussions with the financial institutions from whom      
Natural Wonders was seeking to secure financing, and in light of the terms      
proposed in such financings, revisions to the terms and conditions of the       
agreement, including a possible reduction in the per share purchase price was   
being evaluated. During the period from July 17, 2000 through July 21, 2000 the 
parties discussed possible alternative structures, terms and conditions.        

    In the afternoon of July 21, 2000, Peter Hanelt and Cathy Klein of Natural
Wonders, a representative of Renaissance Capital, Charles Callahan of World of  
Science, a representative of Raymond James & Associates and World of Science's  
and Natural Wonders' respective legal                                           

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counsel participated in a telephone conference call. During that call, Mr.      
Hanelt communicated Natural Wonders' proposed revisions to its original proposed
terms for the merger. Among other things, it was communicated that the purchase 
price per share would be reduced from $1.32 to $1.20 per share of common stock, 
assuming a closing of the merger prior to August 23, 2000, and a per share price
of $1.15 in the event that the merger closed after August 23, 2000. It was      
further communicated that the merger had to be completed no later than September
8, 2000.                                                                        

     On July 24, 2000, the board of directors of World of Science met to discuss
the status of negotiations with Natural Wonders. At this meeting a              
representative of Raymond James & Associates reported to the board of directors 
the terms of Natural Wonders revised offer, including a reduction in the        
purchase price and the condition that the merger be completed on or before      
September 8, 2000. During this meeting, Raymond James & Associates reviewed with
the board its financial valuation analyses of the proposed purchase price.      
Raymond James advised the board that Natural Wonders continued to engage in     
discussions and negotiations with potential sources of financing. After         
substantial discussion, the board of directors instructed Mr. Klaucke to        
communicate in writing with Natural Wonders outlining the terms on which World  
of Science was prepared to proceed with discussions, including a requirement    
that the execution of any merger agreement be concluded by July 27, 2000 and be 
preceded by the delivery of term sheets executed by both Natural Wonders and its
proposed financial lenders evidencing the availability of financing. Mr. Klaucke
was instructed to further advise Natural Wonders that World of Science would    
have no choice but to discontinue discussions in the event that the conditions  
could not be met. On the morning of July 25, 2000, Mr. Klaucke delivered a      
letter to Mr. Hanelt outlining World of Science's terms for continuing          
discussions about a possible merger.                                            

During the period from July 25, 2000 through July 27, 2000 numerous   
discussions took place between representatives of World of Science and Natural  
Wonders, but the discussions did not conclude with an agreement on mutually     
acceptable terms of a possible combination between the two companies.           

     On July 27, 2000, the board of directors of World of Science met to discuss
the status of discussions and Natural Wonders' response to World of Science's   
conditions. Representatives of Raymond James & Associates provided a summary of 
the discussions and negotiations that had taken place since the delivery of     
World of Science's written communication and advised that Natural Wonders was   
unwilling or unable to meet certain of the conditions set out in that letter.   
After substantial discussion, the board of directors unanimously approved the   
termination of further discussions and instructed Mr. Klaucke to inform Natural 
Wonders that World of Science would be unable to continue negotiations related  
to a possible merger. Mr. Klaucke informed Mr. Hanelt in writing that World of  
Science was terminating its discussions and provided a form of proposed press   
release. On July 28, 2000, World of Science issued a press release announcing   
its termination of further merger negotiations.                                 

Over the weekend of July 29, 2000, Mr. Hanelt contacted Mr. Klaucke by
telephone to discuss the possibility of resurrecting the proposed merger        
transaction and indicated that Natural Wonders might be able to meet conditions 
previously identified by World of Science as being essential to any merger of   
the two companies. On July 29, 2000, Mr. Hanelt forwarded a letter proposing    
revised terms and conditions. Throughout the weekend, Mr. Klaucke and Mr.       
Hanelt, together with Raymond James & Associates and Renaissance Capital,       
engaged in numerous telephone conversations regarding a proposed merger.        

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  On Monday, July 31, 2000, the board of directors of World of Science met
telephonically to discuss a new merger proposal received from Natural Wonders.  
At the meeting Raymond James & Associates outlined Natural Wonders' new merger  
proposal. The World of Science board of directors authorized Raymond James &    
Associates to communicate to Natural Wonders its position with respect to       
Natural Wonders' proposed terms and conditions.                                 

On August 2, the Natural Wonders' board of directors held a meeting.  
Counsel to the company provided the directors with a summary of the proposed    
merger agreement and related transactions contemplated by the merger agreement  
and representatives of Renaissance Capital described its financial analysis with
respect to the possible combination. Following presentations regarding          
financial, legal and other aspects of the merger, the Natural Wonder's board of 
directors considered the terms of the merger and the merger agreement and       
approved and adopted the merger agreement.                                      

    On August 3, 2000, the World of Science board of directors held a meeting.
Members of the board of directors were provided copies of the proposed merger   
agreement and, during the meeting, a representative of Harris Beach & Wilcox    
discussed the terms of the merger agreement and the related transactions        
contemplated by the merger agreement. Representatives of Raymond James &        
Associates provided the board with a package of analytical exhibits, reaffirming
its earlier guidance provided orally to the board, that the consideration       
offered by Natural Wonders to the World of Science stockholders was fair from a 
financial point of view, and later delivered its written opinion, to the effect 
that, as of August 3, 2000, the purchase price to be paid to the holders of     
World of Science common stock was fair, from a financial point of view to such  
stockholders. Upon completing its deliberations, the board of directors of World
of Science unanimously approved the merger agreement.                           

On the evening of August 3, 2000, the merger agreement was executed on
behalf of World of Science and Natural Wonders.                                 

On the morning of August 4, 2000, World of Science and Natural Wonders
issued a joint press release announcing the execution of the merger agreement.  

Recommendation of the Board of Directors and Reasons for the Merger             

    During the August 3, 2000 meeting, after extended discussions covering the
factors described below, the board of directors unanimously approved the        
proposed merger agreement. In determining whether to approve the merger and the 
merger agreement, the board of directors of World of Science considered a number
of factors, including the following principal factors:                          

.    the consideration to be received by the stockholders of World of 
 Science in the merger and the board of directors' view of the
         likelihood that the merger would deliver value to the stockholders of
  World of Science exceeding the value that could be expected in
connection with continued independence;                     

     .    the likelihood that the merger could be consummated, noting the timing
of and conditions to the merger;                            

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     .    the terms and conditions set forth in the merger agreement, including,
       but not limited to, the financing contingency and the timing of its
removal;                                                    

     .    the oral presentation of Raymond James & Associates, Inc., followed by
     written confirmation, with respect to its determination as to the
       fairness of the merger, from a financial point of view, to World of
Science's stockholders, and the analyses, methodologies and 
conclusions underlying such determination;                  

.    the premium of $.46 per share, which represents the difference   
        between the merger consideration and the last reported sale price of
   the common stock as reported by Nasdaq on August 2, 2000 ($ .69
      per share), the last trading day prior to the August 3, 2000 board
of directors meeting;                                       

     .    the recent sales release of World of Science and the trading prices of
its common stock; and                                       

    .    World of Science's future prospects and uncertainties in the business
in which World of Science engages;                          

    This description of the information and factors considered by the board of
directors of World of Science above is not meant to be exhaustive, but is       
believed to include all material factors considered by the board of directors of
World of Science. The board of directors did not quantify or attach any         
particular weight to the various factors that it considered in reaching its     
determination that the merger is advisable for, and in the best interests of,   
the stockholders of World of Science. Rather, the board of directors made its   
determination based on the total mix of information available to it, and the    
judgments of individual directors may have been influenced to a greater or      
lesser degree by different factors. In considering the recommendation of the    
board of directors of World of Science with respect to the merger, stockholders 
of World of Science should be aware that the interests of certain directors and 
executive officers with respect to the merger are or may be different from or in
addition to the interests of the stockholders of World of Science generally. The
board of directors was aware of these interests and took them into account in   
making its recommendation.                                                      

The board of directors unanimously recommends adoption of the merger  
agreement by the stockholders of World of Science.                              

Opinion of Financial Advisor                                                    

The World of Science board of directors retained Raymond James &      
Associates, Inc. to deliver an opinion to the board as to the fairness of the   
merger consideration to World of Science's stockholders from a financial point  
of view. At the August 3, 2000 meeting of the World of Science board of         
directors, during which the board of directors reviewed and considered the terms
of the merger, Raymond James provided the board with a package of analytical    
exhibits, reaffirming earlier guidance, provided orally to the board, that the  
consideration offered by Natural Wonders to the World of Science stockholders   
was fair from a financial point of view. The terms of the merger, including the 
merger consideration, were determined by arms-length negotiation between World  
of Science and Natural Wonders.                                                 

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     On August 4, 2000, Raymond James delivered to the World of Science board of
directors a written opinion, dated as of August 4, 2000, that, as of August 3,  
2000 and based upon and subject to the various considerations described therein,
the merger consideration of $1.15 per share in cash to be received by the       
holders of common stock pursuant to the merger agreement was fair to such       
stockholders from a financial point of view. As set forth in the written        
opinion, Raymond James assumed and relied upon, without independent             
verification, the accuracy and completeness of the information reviewed by it   
for the purposes of its opinion. Raymond James did not make or obtain an        
independent evaluation or appraisal of the assets or liabilities of World of    
Science.                                                                        

THE FULL TEXT OF RAYMOND JAMES' OPINION IS ATTACHED AS ANNEX B AND IS 
INCORPORATED INTO THIS DOCUMENT BY REFERENCE. THE SUMMARY OF THE OPINION SET    
FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE   
OPINION. Shareholders of World of Science are urged to read Raymond James'      
opinion in its entirety for a description of the assumptions made, matters      
considered and the qualifications and limitations of the review undertaken by   
Raymond James in rendering its opinion. The opinion was provided to World of    
Science's board of directors in connection with its consideration of the        
transaction contemplated by the merger agreement; however, Raymond James'       
opinion does not address the relative merits of the merger, any alternatives    
thereto or the World of Science board of directors' decision to proceed with the
merger. Further, the opinion does not constitute a recommendation as to how     
holders of World of Science's common stock should vote with respect to the      
merger.                                                                         

In connection with its opinion, Raymond James, among other things:    

   (i)   reviewed the financial terms and conditions as stated in the August
         3, 2000 draft of the merger agreement and assumed the final form of
    the merger agreement would not vary in any respect material to
Raymond James' analysis;                                  

   (ii)  reviewed the audited financial statements of World of Science as of
    and for the years ended January 29, 2000, January 30, 1999 and
     January 31, 1998 and its unaudited financial statements for the
quarters ended April 29, 2000 and May 1, 1999;            

     (iii) reviewed World of Science's annual reports filed on Form 10-K for the
         past three fiscal years ended January 29, 2000, as well as its Form
10-Q for the quarter ended April 29, 2000;                

 (iv)  reviewed other financial and operating information requested from
  and/or provided by World of Science, including financial and
         operating projections, lease agreements and other documents related
to World of Science;                                      

   (v)   discussed with members of the senior management of World of Science
      certain information relating to the aforementioned and any other
 matters which Raymond James deemed relevant to its inquiry;

 (vi)  reviewed the historical market prices and trading activity of the
common stock of World of Science;                         

   (vii) compared historical and projected revenues, operating earnings, net
     income and capitalization of World of Science and certain other
    publicly held companies deemed comparable to World of Science;

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  (viii)  reviewed financial and operating information concerning selected
           business combinations which were deemed comparable in whole or in
part;                                                 

(ix)    compared the merger consideration to the estimated proceeds to
           holders of World of Science common stock that could be reasonably
 expected in an orderly liquidation of the business; and

     (x)     conducted such other financial studies, analyses and investigations
        as Raymond James deemed appropriate for rendering its opinion.

  In preparing the opinion, Raymond James performed a variety of financial
and comparative analyses and made assumptions in conjunction with World of      
Science with respect to assets, financial condition and other matters, many of  
which are beyond the control of World of Science. The estimates of value arrived
at by Raymond James based on such analyses and the valuation results determined 
from any particular analysis are not necessarily indicative of actual values or 
predictive of future results or values, and are inherently subject to           
substantial uncertainty.                                                        

     The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant methods of financial analysis and the         
application of these methods to the particular circumstances and, therefore,    
such an opinion is not readily susceptible to summary description. Each of the  
analyses conducted by Raymond James was carried out in order to provide a       
different perspective on the transaction and to add to the total mix of         
information available. Raymond James did not form a conclusion as to whether any
individual analysis, considered in isolation, supported or failed to support an 
opinion as to fairness of the merger consideration from a financial point of    
view. Rather, in reaching its conclusion, Raymond James considered the results  
of the analyses in light of each other and ultimately reached its opinion based 
on the results of all analyses taken as a whole. Raymond James did not place any
particular reliance or weight on any individual analysis, but instead concluded 
that its analyses, taken as a whole, supported its determination.               

 With respect to financial forecasts and projections provided to Raymond
James by World of Science, Raymond James assumed that such forecasts were       
reasonably prepared on bases reflecting the best available estimates and        
judgments of World of Science's management as to the future financial           
performance of World of Science and that such projections provided a reasonable 
basis upon which Raymond James could form an opinion. Raymond James has assumed 
no responsibility for, and expressed no view as to, such forecasts, projections,
or the assumptions on which they were based.                                    

  Raymond James' opinion is necessarily based on general economic, market,
financial and other conditions as they existed on, and could be evaluated as of,
the date of such opinion, as well as the information then currently available to
Raymond James. It should be understood that, although subsequent developments   
may have affected Raymond James' report, Raymond James does not have any        
obligation to update, revise or reaffirm its report.                            

  The following paragraphs summarize the most significant quantitative and
qualitative analyses performed by Raymond James in arriving at its opinion and  
reviewed by World of Science's board of directors. The summary set forth below  
does not purport to be a complete description of either the analyses underlying 
Raymond James' opinion or the presentation made by Raymond James to the World of
Science board of directors.                                                     

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  Comparison of Historical Stock Price Performance. Raymond James examined
the history of the trading prices for World of Science common stock from January
3, 2000 to August 2, 2000. During this period, World of Science's common stock  
closing price ranged from a low of $0.53 per share to a high of $1.88 per share.
The merger agreement sets forth a purchase price of $1.15 per share, which      
represents a premium to the period's low closing price of 116.5% and a discount 
to the period's high closing price of 38.7%. Raymond James has conducted a      
review of 51 acquisition transactions completed since January 1, 1998 involving 
public companies, each having a transaction value of $25 million or less, and   
has observed the following range of historical premiums:                        

                                                                [Download Table]

                                                                 1 Day Before
                                                                   Agreement 
                                                                   (8/02/00) 
                                                                    -------  
                                                                             
Merger Consideration per Share to World of Science Shareholders   $    1.15  
World of Science Closing Price                                    $  0.6875  
Premium                                                                67.3% 

Historical Premiums for 51 Recent Comparable Transactions:                   
Low                                                                     4.3% 
High                                                                  102.3% 

Average                                                                38.1% 

 The premium of 67.3% being received by World of Science shareholders is
substantially greater than the 38.1% average premium observed for the sample of 
comparable transactions. Raymond James also considered the premium of the merger
consideration to World of Science's closing price on the day prior to the       
announcement, on January 4, 2000, that World of Science had retained Raymond    
James to pursue certain strategic alternatives, including a sale of the         
business. This premium was equal to 53.3%, and is also substantially greater    
than the 38.1% average premium of merger consideration to the stock price       
prevailing the day before the transaction announcement for the sample of        
comparable transactions.                                                        

    Comparison With Selected Publicly Traded Companies. Raymond James compared
selected financial data of World of Science with certain data from publicly     
traded companies considered by Raymond James to be comparable to World of       
Science. Specifically, Raymond James included in its review the following       
specialty toy and mall-based retailers:                                         

.   Toys "R" Us                                                           
.   Zany Brainy                                                           
.   Brookstone                                                            
.   Sharper Image                                                         
.   Electronics Boutique                                                  
.   Hibbett Sporting Goods                                                
.   Sunglass Hut                                                          
.   Natural Wonders                                                       

Except for Toys "R" Us, all of the companies considered are small-capitalization
stocks as determined by their market value of equity of less than $500 million. 

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In examining these comparable companies, Raymond James calculated the enterprise
value of each company as a multiple of its respective: (i) LTM sales; (ii) LTM  
EBITDA; (iii) LTM EBIT; (iv) projected fiscal year ending January 2001 EBITDA;  
and (v) projected fiscal year ending January 2002 EBITDA. The "enterprise value"
of a company is equal to the value of its fully diluted common equity plus the  
average level of debt over the past four quarters and the liquidation value of  
outstanding preferred stock, if any, minus the average level of cash and        
marketable securities over the past four quarters. "LTM" is defined as the last 
twelve-month period for which financial data for the company at issue has been  
publicly reported. "EBITDA" is defined as earnings before interest expense,     
taxes, depreciation and amortization. "EBIT" is defined as earnings before      
interest expenses and taxes. Raymond James also calculated the market value of  
the equity of each company as a multiple of: (i) current book value; (ii) LTM   
earnings; (iii) projected fiscal year ending January 2001 earnings; and (iv)    
projected fiscal year ending January 2002 earnings. All historical data was     
derived from publicly available sources and all projected data was obtained from
First Call Research consensus earnings estimates and Wall Street analyst        
projections. For the twelve months ended April 29, 2000, World of Science       
reported negative EBITDA, EBIT and earnings and, therefore, there was no        
financial basis on which to compare World of Science to the selected comparable 
companies on these criteria. World of Science is also expected to report a loss 
for the fiscal year ended January 2001 and comparison to the respective         
multiples of the selected comparable companies was not meaningful. However,     
World of Science is expected to generate positive EBITDA for the fiscal year    
ended January 2001 and positive net income and EBITDA for the fiscal year ended 
January 2002. Raymond James did make comparisons to the selected comparable     
companies on these criteria. Raymond James' analysis of the comparable companies
yielded the following range of multiples:                                       

                                                                [Download Table]

                             World of                                 
                             Science    Median    Mean    Range       
                            ---------  --------  ------  -------      
                                                                      
Enterprise Value/LTM Sales   0.2 x      0.5 x     0.5 x   0.1 to 0.9 x
Enterprise Value/                                                     
 FYE 1/2001 EBITDA           8.7        5.5       5.0     1.7 to 8.8  
Enterprise Value/                                                     
 FYE 1/2002 EBITDA           4.6        4.3       4.0     1.0 to 7.0  
Equity Value/                                                         
 FYE 1/2002 EPS              7.7        9.3       8.9     1.9 to 14.1 
Equity Value/Book Value      0.3        2.0       2.3     0.2 to 6.4  

Analysis of Selected Mergers and Acquisitions. Raymond James reviewed 
selected acquisitions involving companies in the specialty toy and mall-based   
retail industries that Raymond James believed are reasonably comparable to World
of Science. These transactions consisted of:                                    

Target/Acquiror:                                                            

.   Noodle Kidoodle/Zany Brainy                                         
.   Funco/Barnes & Noble                                                
.   Afterthoughts/Claire's Stores                                       
.   Babbage's Etc./Barnes & Noble                                       
.   Camelot Music/Trans World Entertainment                             
.   Imaginarium/Toys "R" Us                                             
.   Kay-Bee Toy & Hobby Shops/Consolidated Stores                       

As several of the targets were either private companies or divisions of larger  
organizations, or in a distressed financial condition, reliable historical and  
projected financial data was difficult to obtain. Consequently, Raymond James   
could employ only two valuation methodologies in measuring consideration        
received by target shareholders, neither of which Raymond James deemed as being 
as relevant as EBITDA-based or other                                            

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earnings-based methodologies. Raymond James calculated the enterprise value of  
the acquired company implied by each of these transactions as a multiple of LTM 
sales and the equity value of the acquired company as a multiple of book value. 
Raymond James' analysis of these comparable acquisitions yielded the following  
range of multiples:                                                             

                    World of      Median    Mean   Range
Science     
Enterprise Value/LTM Sales         0.2 x        0.5 x   0.5 x   0.3  to  1.2 x  
Equity Value/Book Value            0.3          1.5     2.2     0.6  to  4.2    

For purposes of this analysis, Raymond James focused primarily on the 
Noodle Kidoodle/Zany Brainy transaction. This transaction was highlighted       
because it was the most recent and relevant transaction when compared to the    
merger. Additionally, both Noodle Kidoodle and Zany Brainy were public companies
with readily obtainable historical and projected financial data. Noodle Kidoodle
is a mall-based retailer of educational and non-violent children's products, a  
close comparable to World of Science, and the transaction was completed on July 
27, 2000. In addition to the above analysis, Raymond James calculated the       
enterprise value of target Noodle Kidoodle implied by the transaction as a      
multiple of: (i) LTM sales; (ii) projected fiscal year ending January 2001      
EBITDA; and (iii) projected fiscal year ending January 2002 EBITDA. Raymond     
James also calculated the equity value of Noodle Kidoodle implied by the        
transaction as a multiple of book value. For the twelve months ended            
April 29, 2000, World of Science reported negative EBITDA, EBIT and earnings    
and, therefore, there was no financial basis on which to compare World of       
Science to the Noodle Kidoodle acquisition on these criteria. Raymond James'    
analysis of this transaction yielded the following multiples:                   

                                                                [Download Table]

                                                      Noodle Kidoodle/
                                    World of Science    Zany Brainy   
                                                                      
Enterprise Value/LTM Sales                0.2 x             0.3 x     
Enterprise Value/FYE 1/2001 EBITDA        8.7               6.3       
Enterprise Value/FYE 1/2002 EBITDA        4.6               4.2       
Equity Value/Book Value                   0.3               0.6       

    As shown above, the merger consideration for World of Science shareholders
represents a greater multiple of fiscal 2001 and fiscal 2002 EBITDA than was    
observed in the Noodle Kidoodle transaction.                                    

     Liquidation Analysis. As part of its analysis, Raymond James also attempted
to estimate the proceeds that World of Science's common stockholders could      
reasonably be expected to receive in the event of an orderly liquidation of the 
World of Science assets as of April 29, 2000. Raymond James is not an expert in 
liquidation analyses and it relied upon conversations with and estimates of the 
senior management of World of Science and a review of recent retail industry    
liquidations, especially that of Learningsmith, a retailer comparable to World  
of Science that liquidated its assets during the Christmas 1999 selling season. 
Based on these analyses, Raymond James estimated that the expected proceeds from
an orderly liquidation of World of Science would likely be less than the merger 
consideration of $1.15 per share.                                               

Based upon all of the foregoing analyses and those discussed in the   
opinion, Raymond James determined that the merger consideration was fair to     
holders of World of Science common stock from a financial point of view.        

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 Engagement Letter. Raymond James is actively involved in the investment
banking business and regularly undertakes the valuation of investment securities
in connection with public offerings, private placements, business combinations  
and similar transactions. The World of Science board of directors selected      
Raymond James to act as its financial advisor in connection with the merger     
based on Raymond James' qualifications, expertise and reputation. Pursuant to   
the terms of an engagement letter dated December 30, 1999, (1) World of Science 
paid Raymond James (a) a retainer fee of $50,000 and (b) a fee of $150,000 when 
Raymond James delivered its fairness opinion and (2) Raymond James & Associates 
is entitled to receive a fee of $250,000 at the completion of the merger. In    
addition, World of Science agreed to reimburse Raymond James, upon request by   
Raymond James from time to time, for all out-of-pocket expenses up to $20,000   
incurred by Raymond James in connection with its engagement and to indemnify    
Raymond James and certain related persons against certain liabilities in        
connection with its engagement, including liabilities under U.S. federal        
securities laws. As described below in "Interests of Certain Directors and      
Executive Officers in the Merger - Relationship of Director with Financial      
Advisor", Raymond James has agreed to defer the payment of the $250,000 fee it  
is entitled to at the completion of the merger.                                 

    Other Relationships. In the ordinary course of business, Raymond James and
its affiliates may own or actively trade the securities of World of Science for 
their accounts and the accounts of their customers and, accordingly, may at any 
time hold a long or short position in World of Science securities. Raymond James
has performed investment banking and other services for World of Science in the 
past, including acting as a co-manager of World of Science's 1997 initial public
offering and has been compensated for such services. In addition, Thomas A.     
James, chairman and chief executive officer of Raymond James, is a member of    
World of Science's board of directors.                                          

Interests of Certain Directors and Executive Officers in the Merger             

     In considering the recommendation of the board of directors to vote for the
proposal to adopt the merger agreement, stockholders of World of Science should 
be aware that certain members of the World of Science board of directors and    
members of its management team have agreements or arrangements that provide them
with interests in the merger that differ from those of World of Science         
stockholders. The World of Science board of directors was aware of these        
agreements and arrangements during its deliberations on the merits of the merger
and in determining to recommend to the stockholders of World of Science that    
they vote for the proposal to adopt the merger agreement.                       

Indemnification and Insurance.                                        

   The merger agreements provides that, upon completion of the merger, World
of Science, then as the surviving corporation, or Natural Wonders, will, for a  
period of six years from the completion of the merger, indemnify, defend and    
hold harmless, and provide advancement of expenses to, all past and present     
directors and officers of World of Science and WOSI on the Web in all of their  
capacities:                                                                     

.    to the same extent they were indemnified or had the right to     
          advancement of expenses as of August 3, 2000, which is the date of the
   merger agreement, pursuant to World of Science's certificate of
incorporation and by-laws; and                              

.    to the fullest extent permitted by law, in each case for acts or 
    omissions occurring at or prior to the completion of the merger.

 The merger agreement also provides that, upon completion of the merger,
World of Science, then as the surviving corporation, or Natural Wonders, will   
cause to be maintained, for a period of                                         

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six years after completion of the merger, the current policy of directors' and  
officers' liability insurance maintained by World of Science, or a policy of at 
least the same coverage and amounts containing terms and conditions which are,  
in the aggregate, no less advantageous to the insured, with respect to claims   
arising from facts or events that occurred on or before the completion of the   
merger, although World of Science, then as the surviving corporation, or Natural
Wonders, will not be required to expend in any one year an amount in excess of  
200% of the annual premiums currently paid by World of Science for directors'   
and officers' liability insurance.                                              

    Assumption of Employment and Compensation Agreements; Payment of Severance
Benefits.                                                                       

     Natural Wonders has agreed to assume, and pay the severance benefits under,
the employment agreement of Fred Klaucke, the president and chief executive     
officer of World of Science, and the compensation agreements of Charles         
Callahan, the chief financial officer, vice president of finance and assistant  
secretary of World of Science, and Christine Luchi, the vice president of       
operations of World of Science.                                                 

    In addition to the merger consideration for his stock, Mr. Klaucke will be
paid approximately $394,615 upon the closing of the merger transaction. Pursuant
to the terms of Mr. Klaucke's employment agreement, he may terminate his        
employment with World of Science upon completion of the merger. Mr. Klaucke has 
advised Natural Wonders that he intends to terminate his employment upon        
completion of the merger. As a result of such termination, Mr. Klaucke will be  
paid: (i) any current bonus entitlements and accrued vacation; and (ii) a lump  
sum payment equal to $360,000. He is also entitled to continued participation   
for 24 months in the benefit plans of World of Science immediately before the   
completion of the merger or the provision of comparable benefits by Natural     
Wonders, and the payment of any legal fees and expenses incurred by Mr. Klaucke 
in enforcing his rights under the agreement. The present term of Mr. Klaucke's  
agreement expires on January 31, 2002.                                          

 In addition to the merger consideration payable to Mr. Callahan and Ms.
Luchi, for their stock, Mr. Callahan will be paid approximately $129,230 and Ms.
Luchi will be paid approximately $104,121 upon the closing of the merger        
transaction. Pursuant to the terms of their respective compensation agreements, 
Mr. Callahan and Ms. Luchi may terminate their employment with World of Science 
upon completion of the merger. Both Mr. Callahan and Ms. Luchi have advised     
Natural Wonders of their intentions to terminate their employment. As a result, 
the executive officer will be paid: (i) any current bonus entitlements and      
accrued vacation; and (ii) a lump sum payment equal to twelve months of base    
salary - $120,000 for Mr. Callahan and $100,000 for Ms. Luchi. In addition,     
upon termination, any outstanding stock options previously granted to the       
executive immediately vest and the executive is entitled to continued           
participation for twelve months in the benefit plans of World of Science        
immediately before the completion of the merger or the provision of comparable  
benefits by Natural Wonders.                                                    

In addition, those executive officers may enter into consulting or    
employment agreements or similar types of arrangements with Natural Wonders or  
World of Science, as the surviving corporation.                                 

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Relationship of Director with Financial Advisor.                      

   Thomas James, one of World of Science's directors, is the chairman of the
board of directors and chief executive officer of Raymond James & Associates and
Raymond James Financial, Inc., its parent. World of Science paid Raymond James &
Associates a non-refundable retainer fee of $50,000 in January 2000, when it    
retained Raymond James & Associates to assist World of Science in exploring and 
evaluating various strategic alternatives to maximize stockholder value. At the 
time Raymond James & Associates delivered its fairness opinion to World of      
Science's board of directors, it became entitled to payment of a fee of         
$150,000. At the completion of the merger, Raymond James & Associates will be   
paid a fee of $250,000, together with the reimbursement of out-of-pocket        
expenses. As discussed below, Raymond James & Associates has agreed to defer the
payment of $250,000 of its fee in consideration of a promissory note and        
warrants from Natural Wonders.                                                  

Lack of Financing Sufficient to Complete the Merger                             

On August 2, 2000, Natural Wonders entered into a term sheet with IBJ 
Whitehall Retail Finance, Inc. and a term sheet with Hilco Capital LLP. The IBJ 
Whitehall term sheet contemplates a senior revolving line of credit facility    
providing for a maximum borrowing availability of $50.0 million, secured by a   
first lien on all of the assets of Natural Wonders and its subsidiaries,        
including World of Science. The IBJ term sheet contemplates that the credit     
facility will be used to, among other things, pay the merger consideration,     
refinance Natural Wonders' existing revolving line of credit, and finance the   
working capital needs of the combined companies. The term sheet provides that,  
the credit facility would bear interest at IBJ's prime rate or LIBOR plus 2.75%,
and would mature three years from the date of the closing of the merger. The    
Hilco term sheet contemplates a junior secured term loan in an amount equal to  
the lesser of: $5.0 million from the closing of the merger through December 15, 
2000 and $2.5 million thereafter or 100% of the net recovery value of Natural   
Wonders' eligible inventory, which will be determined after giving effect to the
inventory portion of IBJ's credit facility. The Hilco credit facility would be  
secured by a second lien on all of the assets of Natural Wonders. The Hilco term
sheet contemplates that the proceeds of the Hilco credit facility would be used 
to finance the merger transaction and ongoing working capital needs of the      
combined companies. The Hilco term sheet provides that the Hilco credit facility
will bear interest at 20% per annum and will mature on December 15, 2001.       

The IBJ and Hilco financing are both subject to the satisfaction of a 
number of conditions, including Natural Wonders securing $1.25 million of       
additional subordinated debt or equity beyond the amounts proposed by IBJ and   
Hilco, the satisfactory completion of due diligence by Hilco and IBJ, there     
being no material adverse change in the financial condition, business,          
profitability, assets or operations of Natural Wonders and the approval of IBJ's
and Hilco's respective credit committees. The IBJ and Hilco term sheets are not 
binding and do not evidence a commitment to extend credit to Natural Wonders.   
There can be no assurance that the credit facilities and other transactions     
contemplated by the term sheets will be consummated and, if not, that Natural   
Wonders will be able to secure financing in an amount sufficient to complete the
merger or on acceptable terms.                                                  

  Natural Wonders has informed World of Science that various principals of
Natural Wonders have agreed to provide $550,000 of financing toward the         
additional $1.25 million required under the IBJ and Hilco term sheets, and that 
Renaissance Capital has agreed to defer $450,000 of its fees, and Raymond James 
& Associates has agreed to defer $250,000 of its fees.                          

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Completion and Effectiveness of the Merger                                      

  The merger will be completed when all of the conditions to completion of
the merger are satisfied or waived, including Natural Wonders having obtained   
the necessary financing to pay the merger consideration and the adoption of the 
merger agreement by the stockholders of World of Science. The merger will become
effective upon the filing of a certificate of merger with the New York          
Department of the State.                                                        

We are working toward completing the merger as quickly as possible. We
expect to complete the merger during the third calendar quarter of 2000.        

Structure of the Merger                                                         

     To accomplish the merger, Natural Wonders formed a new company, Merger Sub.
At the time the merger is completed, Merger Sub will be merged into World of    
Science, and World of Science will be the surviving corporation.                

As a result of the merger, at the effective time, each share of common
stock issued and outstanding (other than shares owned by Natural Wonders, World 
of Science or Merger Sub) will be converted into the right to receive, without  
interest, the merger consideration of $1.15 per share. Upon consummation of     
the merger, stockholders will cease to have any further ownership or other      
interest in World of Science.                                                   

Payment for Shares; Disbursing Agent                                            

   Upon the consummation of the merger, each issued and outstanding share of
World of Science common stock, other than shares owned by Natural Wonders, World
of Science or Merger Sub, will be deemed for all purposes to represent only the 
right of the holder to receive the merger consideration. American Stock Transfer
& Trust Company will act as disbursing agent in order to facilitate the payment 
of the merger consideration in exchange for certificates previously representing
shares of World of Science common stock.                                        

    Instructions with regard to the surrender of certificates, together with a
letter of transmittal to be used for this purpose, will be mailed to            
stockholders promptly after the effective date of the merger. Stockholders      
should surrender certificates for shares of World of Science common stock in    
accordance with the instructions in the letter of transmittal. Each holder of   
common stock shall receive payment promptly after surrender of the certificate  
or certificates representing his or her shares of World of Science common stock 
and related documentation by mailing such stock certificate or certificates and 
related documentation to the exchange agent, for payment, as promptly as        
practicable following the effective date of the merger, by return mail. Each    
holder of shares held in street name by a broker, dealer, clearing agency or    
other nominee should contact that entity as soon as possible prior to the       
effective date of the merger to direct the entity to tender such holder's shares
as instructed by the letter of transmittal.                                     

STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD

   Upon receipt of a certificate or certificates for World of Science common
stock together with a duly executed letter of transmittal from a particular     
stockholder, the exchange agent will issue cash                                 

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or a cash equivalent to the person or persons entitled thereto in an amount     
equal to the product determined by multiplying the merger consideration of $1.15
per share by the number of shares of common stock represented by such           
stockholder's certificate or certificates. No interest will accrue to holders of
common stock in respect of payments to which they become entitled upon          
consummation of the merger.                                                     

 If any payment for shares of common stock is to be made in a name other
than that in which the certificate or certificates for such shares are          
registered on the stock transfer books of World of Science as of the effective  
time of the merger, it will be a condition of such payment that the certificate 
or certificates so surrendered shall be properly endorsed or otherwise be in    
proper form for transfer, and that the person requesting such transfer pay to   
the disbursing agent all transfer or other taxes or establish that such taxes   
have been paid or are not required to be paid.                                  

   Natural Wonders has agreed in the merger agreement to deposit or cause to
be deposited in trust with the disbursing agent, not later than the effective   
time of the merger, all of the cash required for payment of the aggregate merger
consideration to be made to all holders of World of Science common stock.       

Dissenters' Rights                                                              

The following summary of the provisions of Section 623 of the New York
Business Corporation Law is not intended to be a complete statement of those    
provisions and is qualified in its entirety by reference to the full text of    
Section 623 of the New York Business Corporation Law, a copy of which is        
attached to this proxy statement as Annex C and is incorporated into this       
summary by reference.                                                           

  Under New York law, World of Science common stockholders are entitled to
appraisal rights in connection with the merger.                                 

  If the merger is completed, each holder of World of Science common stock
who (1) files written notice with World of Science of an intention to exercise  
rights to appraisal of his, her or its shares prior to the World of Science     
special meeting or at the special meeting, but before the vote at the special   
meeting, and (2) follows the procedures set forth in Section 623, will be       
entitled to be paid for his, her or its World of Science common stock by the    
surviving corporation the fair value in cash of the shares of World of Science  
common stock. The fair value of shares of World of Science common stock will be 
determined by the New York Supreme Court. The shares of World of Science common 
stock with respect to which holders have perfected their appraisal rights in    
accordance with Section 623 and have not effectively withdrawn or lost their    
appraisal rights are referred to in this proxy statement as the "dissenting     
shares."                                                                        

     Within ten days after the date of the special meeting, World of Science, as
the surviving corporation in the merger, must mail a notice to all stockholders 
who have complied with (1) and (2) above notifying such stockholders of the     
approval of the merger. Within 20 days after the giving of such notice, any     
stockholder who elects to dissent must file with World of Science written notice
of election to dissent, stating such stockholder's name and residence address,  
the number of shares of common stock as to which dissent is made and a demand   
for payment of the fair value of such shares.                                   

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A dissenting stockholder may not dissent as to less than all shares of
World of Science common stock beneficially owned by the stockholder. At the time
of filing the notice of election to dissent or within one month thereafter, the 
dissenting stockholder must submit certificates representing all of the         
dissenting shares to World of Science or its transfer agent. Failure to submit  
the certificates may result in the loss of such stockholder's dissenters'       
rights.                                                                         

     Within 15 days after the expiration of the period within which stockholders
may file their notices of election to dissent or within 15 days after completion
of the merger, whichever is later, but in no event later than 90 days after the 
special meeting, World of Science must make a written offer, which, if the      
merger has not been consummated within such 90 day period, may be conditioned   
upon such consummation, to each dissenting stockholder who has filed a notice of
election, to pay for the dissenting shares at a specified price which World of  
Science considers to be their fair value. If World of Science and the dissenting
stockholder are unable to agree as to such fair value, Section 623 provides for 
a judicial determination of the fair value. Upon completion of the merger, a    
dissenting stockholder shall cease to have any of the rights of a stockholder,  
except the right to be paid the fair value of the dissenting stockholder's      
shares, and any other rights under Section 623.                                 

A vote against approval and adoption of the merger agreement does not 
constitute the written objection required to be filed by a dissenting           
stockholder. Failure by a stockholder to vote against approval and adoption of  
the merger agreement, however, will not constitute a waiver of rights under     
Section 623 provided that a written objection has been properly filed and such  
stockholder has not voted any of his, her or its shares for the approval and    
adoption of the merger agreement. A notice of election may be withdrawn by a    
stockholder at any time prior to acceptance of World of Science offer or        
within 60 days of the effective time of the merger.                             

    If you wish to exercise appraisal rights but have a beneficial interest in
shares which are held of record by or in the name of another person, such as a  
broker or nominee, you should act promptly to cause the record holder to follow 
the procedures set forth in Section 623 to perfect your appraisal rights.       

    A demand for appraisal should be signed by or on behalf of the stockholder
exactly as the stockholder's name appears on the stockholder's stock            
certificates. If the shares are owned of record in a fiduciary capacity, such as
by a trustee, guardian or custodian, the demand should be executed in that      
capacity, and if the shares are owned of record by more than one person, as in a
joint tenancy or tenancy in common, the demand should be executed by or on      
behalf of all joint owners. An authorized agent, including one or more joint    
owners, may execute a demand for appraisal on behalf of a record holder;        
however, in the demand the agent must identify the record owner or owners and   
expressly disclose that the agent is executing the demand as an agent for the   
record owner or owners. A record holder such as a broker who holds shares as    
nominee for several beneficial owners may exercise appraisal rights for the     
shares held for one or more beneficial owners and not exercise rights for the   
shares held for other beneficial owners. In this case, the written demand should
state the number of shares for which appraisal rights are being demanded. When  
no number of shares is stated, the demand will be presumed to cover all shares  
held of record by the broker or nominee.                                        

 If any holder of World of Science common stock who demands appraisal of
his, her or its shares under Section 623 fails to perfect, or effectively       
withdraws or loses the right to appraisal, his, her or its shares will be       
converted into a right to receive $1.15 in cash, for each share or its World of 
Science common stock in accordance with the terms of the merger agreement.      
Dissenting shares lose their status as dissenting shares if:                    

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.    the merger is abandoned;                                         

   .    the dissenting stockholder fails to make a timely written demand for
appraisal;                                                  

.    the dissenting shares are voted in favor of the merger;          

.    neither World of Science nor the stockholder files a complaint or
    intervenes in a pending action within the statutory time periods
        prescribed in Section 623 after the effective time of the merger; or

.    the stockholder delivers to World of Science, as the surviving   
       corporation, within 60 days of the effective time of the merger, or
        thereafter with World of Science's approval, a written withdrawal of
    the stockholder's demand for appraisal of the dissenting shares,
         although no appraisal proceeding in the New York Supreme Court may be
      dismissed as to any stockholder without the approval of the court.

Failure to follow the steps required by Section 623 of the New York Business    
Corporation Law for perfecting appraisal rights may result in the loss of       
appraisal rights, in which event a World of Science stockholder will be entitled
to receive the consideration with respect to the holder's dissenting shares in  
accordance with the merger agreement. In view of the complexity of the          
provisions of Section 623 of the New York Business Corporation Law, World of    
Science stockholders who are considering objecting to the merger should consult 
their own legal advisors.                                                       

Regulatory Matters                                                              

  There are no Federal or state regulatory requirements which remain to be
complied with in order to consummate the merger (other than the filing of the   
certificate of merger by the New York Department of State).                     

     The Hart-Scott-Rodino Antitrust Improvements Act of 1976 prevents specified
transactions from being completed until required information and materials are  
furnished to the Antitrust Division of the Department of Justice and the Federal
Trade Commission and specified waiting periods are terminated or expire. World  
of Science and Natural Wonders each filed the required information and materials
to notify the Department of Justice and the Federal Trade Commission of the     
merger and requested early termination of the specified waiting period. Both    
World of Science and Natural Wonders received early termination of the waiting  
period from the Federal Trade Commission. Essentially, this means that          
the Antitrust Division of the Department of Justice and the Federal Trade       
Commission have determined not to challenge the merger on antitrust grounds.    
Notwithstanding the grant of early termination of the waiting period, either the
Antitrust Division of the Department of Justice or the Federal Trade Commission 
could take action under the antitrust laws if it later determines that such     
action is necessary or desirable in the public interest, or other persons could 
take action under the antitrust laws, including seeking to enjoin the merger.   
Additionally, at any time before or after the completion of the merger,         
notwithstanding that the applicable waiting period was terminated, any state    
could take action under the antitrust laws as it deems necessary or desirable in
the public interest. There can be no assurance that a challenge to the merger   
will not be made or that, if a challenge is made, we will prevail.              

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The Merger Agreement                                                            

    The following summary of the merger agreement is qualified in its entirety
by reference to the complete text of the merger agreement, which is incorporated
by reference and attached as Annex A to this proxy statement. We urge you to    
read the full text of the merger agreement.                                     

Representations and Warranties                                                  

Representations and Warranties by World of Science                    

   The merger agreement contains customary representations and warranties by
World of Science as to:                                                         

    .    corporate organization and similar corporate matters concerning World
of Science and WOSI on the Web;                             

.    the capital structure of World of Science;                       

.    power and authority of World of Science to execute the merger    
      agreement and complete the merger subject to stockholder approval;

.    compliance with instruments, including the World of Science      
         certificate of incorporation and bylaws and other agreements to which
World of Science is a party;                                

.    fair presentation of World of Science's financial statements and 
reports filed with the Securities and Exchange Commission;  

  .    absence of changes in the respective businesses of World of Science
and WOSI on the Web since January 29, 2000;                 

  .    no required filing or approvals from any governmental or regulatory
        agency other than under the Hart-Scott Rodino Antitrust Improvements
      Act and the approval of this proxy statement by the Securities and
Exchange Commission;                                        

.    pending or threatened  litigation;                               

.    obligations and  liabilities;                                    

.    labor and employment matters;                                    

.    employee benefit matters;                                        

.    broker's and finder's fees;                                      

    .    accuracy and truthfulness of information relating to World of Science
and WOSI on the Web contained in this proxy statement;      

.    tax matters;                                                     

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.    description and title to, or leasehold interests in, all real    
properties, and the absence, or the extent of, any liens and
          encumbrances on property used by World of Science and WOSI on the Web;

    .    absence of any material breach or default under agreements, contracts
and other instrument to which World of Science is a party;  

  .    ownership of and rights to use intellectual property and absence of
related infringement claims;                                

.    insurance;                                                       

 .    contracts and other instruments of World of Science or WOSI on the
         Web, which are material to or restrictive on the business of World of
        Science or WOSI on the Web, or relate to independent consultants and
guarantees;                                                 

.    arrangements or agreements with officers and directors;          

.    compliance with applicable laws, licenses or government          
authorizations;                                             

.    environmental matters; and                                       

.    absence of any untrue representation or warranty.                

Representations and Warranties by Natural Wonders                     

 The merger agreement contains standard  representations  and warranties
by Natural Wonders and Merger Sub, its  wholly-owned  subsidiary,  which will be
merged into World of Science pursuant to the merger, as to:                     

.    corporate organization and similar corporate matters concerning  
Natural Wonders and Merger Sub;                             

   .    power and authority of Natural Wonders and Merger Sub to execute the
merger agreement and complete the merger;                   

     .    compliance with instruments, including the Natural Wonders' and Merger
       Sub's respective certificates of incorporation and bylaws and other
 agreements to which Natural Wonders or Merger Sub is a party;

  .    no required filing or approvals from any governmental or regulatory
        agency other than under the Hart-Scott Rodino Antitrust Improvements
Act;                                                        

   .    best efforts to obtain financing necessary for Parent and Merger Sub
to complete the merger;                                     

    .    accuracy and truthfulness of information relating to Natural Wonders,
      Merger Sub and Natural Wonders' affiliates contained in this proxy
statement; and                                              

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.    absence of any untrue representation or warranty.                

   Conduct of Business Pending the Merger. Under the merger agreement, World
of Science has agreed that, during the period before completion of the merger,  
except as expressly contemplated or permitted by the merger agreement or to the 
extent that Natural Wonders consents in writing, it will carry on its business  
in the usual and ordinary course and will:                                      

  .    preserve its business organization intact and maintain its existing
      relationships with its customers, suppliers, employees, agents and
other business partners;                                    

  .    file and cause WOSI on the Web to file all reports and returns when
due;                                                        

.    provide Natural Wonders with access to its properties, books and 
records;                                                    

.    provide prompt notice of any breach or potential breach of a     
representation, any material adverse change in the financial
          condition, properties or businesses of World of Science or WOSI on the
          Web or any event which would render its representations and warranties
untrue or inaccurate;                                       

    .    convene a special meeting of its stockholders to consider and vote on
the merger;                                                 

     .    cause its independent auditors to prepare and deliver a comfort letter
    with respect to World of Science's interim financial statements;

   .    cancel all outstanding options to acquire shares of World of Science
common stock;                                               

.    use its best efforts to take, or cause to be taken, such action  
necessary to complete the merger; and                       

.    provide notice of its intention to enter into leases for seasonal
stores.                                                     

     In addition, World of Science has agreed, subject to certain exceptions, to
comply and insure WOSI on the Web's compliance with specific restrictions       
relating to the following:                                                      

.    the declaration of dividends in respect of capital stock and the 
split, combination, reclassification of its capital stock;  

.    the amendment of its certificate of incorporation or bylaws;     

    .    the sale, pledge, disposition or encumbrance of its WOSI on the Web's
    capital stock, or securities convertible or exchangeable for, or
         options, warrants or other rights to acquire its capital stock or the
capital stock of WOSI on the Web;                           

.    the transfer, sale, lease, license, mortgage, pledge or other    
disposition of any assets;                                  

.    incurrence of any indebtedness or other liability;               

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.    the acquisition or redemption of its capital stock;              

.    the authorization of capital expenditures in excess of $10,000   
  individually and $50,000 in the aggregate, or the making of an
          investment in, or the acquisition of the assets or stock of, any other
          person in excess of $10,000 individually and $50,000 in the aggregate;

.    entering into new leases for permanent retail stores;            

    .    the grant of any severance or termination pay to or entering into any
        employment agreement with any director, officer or employee of World
of Science or WOSI on the Web;                              

     .    the adoption or amendment of any agreement or employee benefit plan to
increase compensation or benefits payable thereunder;       

.    the acquisition of control or majority ownership interest of any 
     business, corporation, partnership, association or other business
         organization or division, or the acquisition of a substantial portion
of the foregoing entities' assets;                          

 .    the merger, consolidation or combination with another corporation;

   .    the modification, amendment or termination of any lease, contract or
    agreement, or the waiver, release or assignment of any rights or
claims;                                                     

.    cancelation or termination of insurance policies; and            

.    taking or agreeing or take any of the actions described above.   

   Interim Operations. In addition to the above operational covenants, World
of Science has agreed that from August 3, 2000, the date of the merger          
agreement, until Natural Wonders has secured the financing necessary to         
consummate the merger and has removed the condition to the closing of the merger
related to such financing, it will provide Natural Wonders with access,         
generally, to World of Science's operating information. The information provided
will be primarily focused on World of Science's "open to buy" positions,        
personnel issues, inventory and sales, and borrowings and cash position. Natural
Wonders will not have any control over the business operations of World of      
Science and will have no right to participate in World of Science's purchasing, 
hiring, borrowing or other operational decisions.                               

     After Natural Wonders has secured the financing necessary to consummate the
merger and the condition to closing the merger related to such financing is     
removed, World of Science has agreed to permit Natural Wonders to locate two of 
its employees at World of Science's corporate headquarters in Rochester, New    
York, to directly oversee World of Science's acquisition of inventory and       
shipment of merchandise and to insure a smooth and organized conversion of the  
World of Science business in the event the merger is completed. These employees 
will have no approval or veto rights over World of Science's operations, but    
would simply be assisting in the                                                

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contemplated integration efforts by staying fully informed on the status of     
World of Science's merchandising, operations, and stores.                       

  No Solicitation of Other Transactions. Pursuant to the merger agreement,
World of Science has agreed that it will not, and it will not permit WOSI on the
Web, or any officer, director, employee, representative or agent of World of    
Science to, solicit or initiate inquiries, or the making of any proposal with   
respect to the acquisition, business combination or purchase of all or a        
significant portion of the assets of or any equity interest in World of Science 
or WOSI on the Web.                                                             

Nothing in the merger agreement prohibits World of Science from       
participating in discussions, negotiations or furnishing information in         
connection with, or from considering, reviewing and accepting an unsolicited    
third-party offer to acquire World of Science.                                  

   World of Science has agreed to notify Natural Wonders of any inquiries or
proposals received by, or if any information is requested from, or of any       
discussions or negotiations being sought with, World of Science. World of       
Science has also agreed to request or cause to be requested the return of all   
information it may have provided to others prior to August 3, 2000, the date of 
the merger agreement, in connection with the possible acquisition of World of   
Science. In the event World of Science violates the non-solicitation provision  
of the Merger Agreement or World of Science closes a transaction for the        
acquisition of all or substantially all of World of Science shares of common    
stock or assets arising out of an unsolicited third party purchase offer made   
prior to the closing of the merger, World of Science is obligated to pay Natural
Wonders a break up fee of $150,000 within 30 days of the violation or closing of
the third-party transaction.                                                    

Conditions to the Completion of Merger. Each of World of Science's and
Natural Wonders' obligation to complete the merger is subject to the            
satisfaction or waiver of the following conditions:                             

  .    the adoption of the merger agreement by the affirmative vote of the
       holders of two-thirds of the outstanding shares of World of Science
common stock;                                               

    .    the absence of any law, order or injunction prohibiting completion of
the merger;                                                 

.    the receipt of all necessary approvals and consents; and         

   .    World of Science's receipt of a written opinion from Raymond James &
     Associates that the merger consideration is fair from a financial
point of view to the World of Science stockholders.         

     The obligation of World of Science to complete the merger is subject to the
satisfaction of the following additional conditions, which may be waived by     
World of Science:                                                               

     .    Natural Wonders shall have secured the financing necessary to complete
the merger prior to August 25, 2000;                        

.    Natural Wonders shall have deposited or caused to be deposited in
  trust with the disbursing agent an amount of cash equal to the
        aggregate merger consideration to be paid to the holders of World of
Science common stock;                                       

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.    Natural Wonders shall have executed and delivered agreements of  
         assumption and acknowledgment of entitlement, agreeing to assume, and
        pay the severance benefits under, Mr. Klaucke's employment agreement
and Mr. Callahan's and Ms. Luchi's compensation agreements; 

    .    World of Science must have received a written opinion of counsel from
         Sheppard, Mullin, Richter & Hampton LLP with respect to the corporate
 organization of Natural Wonders and Merger Sub, the power and
       authority of Natural Wonders and Merger Sub to complete the merger,
  the receipt of all necessary approvals, and the absence of any
         conflict or breach under the certificates of incorporation and bylaws
   of Natural Wonders and Merger Sub and other agreements to which
          Natural Wonders or Merger Sub is a party in the performance of each of
their obligations under the merger agreement;               

   .    the representations and warranties of Natural Wonders and Merger Sub
          must be true and correct as of the date of the merger agreement and as
of the date of completion of the merger; and                

     .    Natural Wonders and Merger Sub must have performed and complied in all
        material respects with all of their respective agreements, covenants
       and conditions required to be performed or complied with by each of
them under the merger agreement.                            

  The obligations of Natural Wonders and Merger Sub to complete the merger
are subject to the satisfaction of the following additional conditions which may
be waived by Natural Wonders or Merger Sub:                                     

     .    Natural Wonders shall have secured the financing necessary to complete
the merger prior to August 25, 2000;                        

  .    no material adverse change in the prospects, financial condition or
          results of operations of World of Science between January 29, 2000 and
the completion of the merger;                               

    .    Natural Wonders and Merger Sub must have received from Harris Beach &
Wilcox, LLP, a written opinion with respect to the corporate
    organization of World of Science, the absence of any issuance or
       change in the authorized capital stock of World of Science, the due
          authorization, validity and assessability of issued shares of World of
        Science common stock, the power and authority of World of Science to
       complete the merger, the receipt of all necessary approvals and the
absence of any conflict or breach under the certificate of  
        incorporation and bylaws of World of Science and other agreements to
which World of Science is a party in the performance of its 
obligations under the merger agreement;                     

 .    World of Science's representations and warranties must be true and
        correct as of the date of the merger agreement and as of the date of
completion of the merger; and                               

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.  World of Science must have performed or complied in all material   
     respects with all agreements, covenants and conditions required to be
performed or complied with by it under the merger agreement.    

  Termination. The merger agreement may be terminated at any time prior to
the completion of the merger, whether before or after the stockholder approval  
has been obtained:                                                              

 .    by either World of Science or Natural Wonders if the merger is not
     completed on or before October 2, 2000, except that this right to
         terminate the merger agreement will not be available to any party who
     shall be in breach of its obligations under the merger agreement;

.    by either World of Science or Natural Wonders if the financing   
          contingency is not removed by Natural Wonders in writing by August 25,
2000;                                                       

.    by either World of Science or Natural Wonders if the shareholders
of World of Science do not approve the merger; and          

.    by either World of Science or Natural Wonders if the other party 
          materially breaches any of its representations and warranties or fails
 to comply in any material respect with its covenants or other
agreements contained in the merger agreement.               

     Amendment, Extension and Waiver. The merger agreement may be amended by the
parties, by action taken by their respective boards of directors, at any time   
before or after approval of the merger by the stockholders of World of Science  
has been obtained. After the approval has been obtained, no amendment may be    
made which by law requires further approval by the stockholders of World of     
Science, without the further approval. All amendments to the merger agreement   
must be in writing and signed by each party.                                    

    At anytime before the completion of the merger, the parties may, by action
taken or authorized by their respective boards of directors, to the extent      
legally allowed:                                                                

     .    extend the time for the performance of any of the obligations or other
acts of the other parties;                                  

     .    waive any inaccuracies in the representations and warranties contained
        in the merger agreement or in any document delivered pursuant to the
merger agreement; and                                       

     .    waive compliance with any of the agreements or conditions contained in
the merger agreement.                                       

All extensions and waivers must be in writing and signed by the party 
against whom the waiver is to be effective.                                     

 Expenses. Whether or not the merger is completed, all expenses and fees
incurred in connection with the merger agreement and the merger will be paid by 
the party incurring the expenses or fees, except that Natural Wonders paid      
$150,000 of documented costs and expenses incurred by World of Science upon the 
filing of a preliminary proxy statement and $250,000 of such costs and expenses 
upon the mailing of this Proxy Statement.                                       

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Voting Agreement                                                                

In connection with the execution and delivery of the merger agreement,
Natural Wonders entered into a voting agreement with each of the directors of   
World of Science under which they agreed to vote all their shares of World of   
Science common stock in favor of the adoption of the merger agreement. As of the
record date for the special meeting, these directors owned shares of World of   
Science common stock representing approximately 43.25% of the total voting power
of the outstanding shares of World of Science capital stock.                    

  Each voting agreement prohibits the director from selling, transferring,
pledging, encumbering, assigning or otherwise disposing of any shares of World  
of Science common stock.                                                        

     The voting agreement terminates upon the earlier to occur of the completion
of the merger and the termination of the merger agreement in accordance with its
terms.                                                                          

Certain Federal Income Tax Consequences of the Merger                           

     The following summary is a general discussion of certain anticipated United
States federal income tax consequences of the merger to World of Science        
stockholders. The summary assumes that stockholders are individuals or          
corporations who do not have a special tax status (e.g., dealers in securities, 
nonresident aliens, individual retirement accounts, or tax-exempt               
organizations). The discussion is based upon existing federal tax law and does  
not address any state, local or foreign tax consequences of the merger. The     
discussion also does not describe certain special tax rules that may apply to   
stockholders who acquired their stock pursuant to incentive stock options or    
other stock compensation arrangements.                                          

     The exchange by stockholders of their shares of common stock for the merger
consideration pursuant to the merger will be a taxable transaction for federal  
income tax purposes. A stockholder whose shares are exchanged generally will    
recognize gain or loss equal to the difference between the amount of cash       
received pursuant to the merger and his or her adjusted tax basis in the shares 
exchanged therefor. Such gain or loss will constitute capital gain or loss if   
the shares exchanged in the merger were held as capital assets. Capital gain or 
loss will constitute long-term capital gain or loss if the stockholder's holding
period with respect to the shares is greater than one year and otherwise will   
constitute short-term capital gain or loss.                                     

Under current federal income tax law, the highest marginal tax rate   
applicable to ordinary income of individuals is 39.6%, and the highest rate     
applicable to corporations is 35%. Net capital gains (the excess of net long-   
term capital gains over net short-term capital losses) generally are taxed at   
rates up to 20% for individuals and at the regular corporate rates for          
corporations. The excess of net short-term capital gains (the excess of short-  
term capital gains over short-term capital losses) over net long-term capital   
losses (the excess of long-term capital losses over long-term capital gains)    
generally is taxed at the same rates as ordinary income for both individuals and
corporations, as applicable. Corporations may use capital losses only against   
capital gains. Individuals may use capital losses only against capital gains and
up to $3,000 of ordinary income (married individuals filing separate returns may
each only apply capital losses against up to $1,500 of ordinary income).        

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Compensatory stock option holders whose options are canceled in connection with 
the merger in exchange for a cash payment will recognize ordinary compensation  
income in the amount of such cash payment. World of Science will be required to 
withhold applicable federal and state taxes from such payment.                  

  STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO
THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES OF THE MERGER, INCLUDING   
POTENTIAL AND RECENT CHANGES OF LAW. THE FOREGOING SUMMARY IS INTENDED AS A     
GENERAL DESCRIPTION ONLY OF CERTAIN MATERIAL TAX CONSEQUENCES AND DOES NOT      
CONSIDER THE PARTICULAR CIRCUMSTANCES OF EACH STOCKHOLDER.                      

Accounting Treatment of the Merger                                              

  The merger will be accounted for under the "purchase" method whereby the
purchase price paid for common stock will be allocated based upon the fair value
of the assets acquired and the liabilities assumed pursuant to the merger as of 
the effective date of the merger.                                               

PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT                 

 The following tables set forth, as of ______, 2000, certain information
regarding the beneficial ownership of World of Science's common stock, as of the
record date, by (i) each person known by World of Science to be the beneficial  
owner of more than 5% of the outstanding common stock (without taking into      
account shares of World of Science's common stock that Natural Wonders may be   
deemed to beneficially own as a result of the voting agreement), (ii) each of   
World of Science's directors and executive officers, and (iii) all directors and
executive officers of World of Science as a group.                              

     The nature of beneficial ownership shown in the tables is, unless otherwise
noted, shares for which the owner has sole voting and sole investment power.    
Beneficial ownership as set forth in the table includes _________ presently     
exercisable options to purchase shares of World of Science common stock. At the 
effective time of the merger, each outstanding option to purchase common stock  
will be canceled and will be converted into the right to receive the difference 
between the merger consideration and the exercise price for those options.      
However, the options listed in the following tables do not represent shares of  
common stock entitled to vote at the special meeting.                           

Ownership information is based upon information furnished by the respective     
persons listed.                                                                 

                                                   Amount         Percent of
Name of Beneficial Owner or Group                 of Beneficial    Common Stock 
and Nature of Beneficial Ownership                  Ownership       Outstanding 
----------------------------------                -------------    ------------ 
Fred H. Klaucke /(1)/...........................       1,769,140        37.4%   
Thomas A. James /(2)/...........................         229,800         4.8%   
Richard B. Callen /(3)/.........................          40,335         *      
Patrick J. Fulford /(4)/........................           6,500         *      
Charles A. Callahan /(5)/.......................          56,000         1.2%   
Christine M. Luchi /(6)/........................          54,500         1.1%   

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All executive officers and directors as a                                       
Group (6 persons) /(7)/.....................        2,156,275        44.5%

------------------                                                              

* Less than 1%                                                                  
(1) Includes 227,140 shares which are owned jointly with Mr. Klaucke's
spouse.                                                       
   (2) Includes 213,800 shares held by trusts of which Mr. James is the sole
  trustee and 16,000 shares subject to currently exercisable stock
    options. Mr. James's business address is: Raymond James Financial,
Inc., 880 Carillon Parkway, St. Petersburg, Florida 33716.    
   (3) Includes 16,000 shares subject to currently exercisable stock options
 and 8,335 shares held by bank as custodian for Mr. Callen's IRA
    Account. Also includes 6,000 shares held in trust by an individual
        trustee, as to which Mr. Callen has reported to the Company that he is
the beneficial owner.                                         
   (4) Includes 4,000 shares subject to currently exercisable stock options.
    (5) Includes 36,000 shares subject to currently exercisable stock options.
    (6) Includes 36,000 shares subject to currently exercisable stock options.
     (7) Includes 108,000 shares subject to currently exercisable stock options.

STOCKHOLDER PROPOSALS 

If the merger is consummated, World of Science will not hold an annual
meeting of stockholders in 2001. However, if the merger is not consummated and  
the 2001 annual meeting of stockholders is held, stockholders interested in     
submitting a proposal for inclusion in the proxy materials for the Company's    
annual meeting of stockholders in 2001 may do so by following the procedures    
prescribed in Rule 14a-8 under the Securities Exchange Act of 1934 and the      
Company's bylaws. To be eligible for inclusion in the Company's proxy statement 
and proxy, stockholder proposals must be received by the Company's Corporate    
Secretary no later than January 6, 2001.                                        

Advance Notice Procedures. Under the Company's bylaws, no business may be       
brought before an annual meeting unless it is specified in the notice of the    
meeting (which includes shareholder proposals that the Company is required to   
include in its proxy statement pursuant to Rule 14a-8 under the Securities      
Exchange Act of 1934) or is otherwise brought before the meeting by or at the   
direction of the Board or by a shareholder entitled to vote at the meeting who  
has delivered notice to the Secretary of the company (containing certain        
information specified in the bylaws) not less than 90 or more than 120 days     
prior to the first anniversary of the date of the Company's proxy statement for 
the preceding year's annual meeting. These requirements are separate from and in
addition to the SEC's requirements that a shareholder must meet in order to have
a shareholder proposal included in the Company's proxy statement. The Company   
may use its discretion in voting proxies with respect to stockholder proposals  
that do not meet the foregoing advanced notice procedures.                      

OTHER MATTERS 

Management knows of no other business to be transacted at the special 
meeting, but, if any other matters do properly come before the special meeting, 
the persons named as proxies or their substitute will vote or act with respect  
to such other matters in accordance with the direction of a majority of the     
board of directors of World of Science.                                         

WHERE YOU CAN FIND MORE INFORMATION 

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  Both World of Science and Natural Wonders file reports, proxy statements
and other information with the Securities and Exchange Commission under the     
Securities Exchange Act of 1934, as amended. You may read and copy this         
information at the following SEC locations:                                     

                                                                [Download Table]
                                                                               
Public Reference Room   New York Regional Office   Chicago Regional Office     
450 Fifth Street, N.W.  7 World Trade Center       City Corp. Center           
Room 1024               Suite 1300                 500 West Madison Street     
Washington, D.C. 20549  New York , New York 10048  Suite 1400                  
                                                   Chicago, Illinois 60661-2511

You also may obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,    
D.C. 20549, at prescribed rates. Further information on the operation of the    
SEC's Public Reference Room in Washington, D.C. may be obtained by calling the  
SEC at 1-800-SEC-0330.                                                          

 The SEC also maintains a worldwide website that contains reports, proxy
statements and other information about registrants, such as us, that file       
electronically with the SEC. The address of that website is: http:\\www.sec.gov.

   The SEC allows us to "incorporate by reference" into this proxy statement
information Natural Wonders has filed with it, which means we can disclose      
important information to you by referring you to those documents. These         
incorporated documents contain important business and financial information     
about Natural Wonders that may not be included in or delivered with this proxy  
statement. The information incorporated by reference is considered to be part of
this proxy statement. We incorporate by reference the documents listed below:   

.  Natural Wonders' 1999 Annual Report to Stockholders;                       

.  Natural Wonders' Annual Report on Form 10-K for the year ended January 29, 
2000;                                                                     

.  Natural Wonders' Report on Form 8-K dated June 8, 2000; and                

.  Natural Wonders' Quarterly Report on Form 10-Q for the fiscal quarter ended
April 29, 2000.                                                           

A copy of Natural Wonders' 1999 Annual Report to Stockholders, Natural
Wonders' Annual Report on Form 10-K for the year ended January 29, 2000, Natural
Wonders' Report on Form 8-K dated June 8, 2000 and Natural Wonders' Quarterly   
Report on Form 10-Q for the quarter ended April 29, 2000 are included in this   
proxy statement as Annex D, Annex E, Annex F and Annex G respectively.          

FORWARD-LOOKING STATEMENTS  

This proxy statement contains certain forward-looking statements with 
respect to the financial condition, results of operation and business of World  
of Science. You can find many of these statements by looking for words such as  
"believes," "expects," "anticipates," "estimates" or similar expressions.       

     These forward-looking statements are subject to numerous assumptions, risks
and uncertainties. Various factors may cause actual results to be materially    
different from those contemplated by the forward-looking statements. Information
concerning factors that may affect actual results is included in the SEC reports
and other information filed by World of Science with the SEC.                   

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AGREEMENT AND PLAN OF MERGER  
----------------------------  

       AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"),
dated as of August 3, 2000, among World of Science, Inc., a New York corporation
(the "Company"), Natural Wonders, Inc. a Delaware corporation ("Parent"), and a 
New York corporation to be formed, as referred to in Section 9.10, which will be
a wholly-owned subsidiary of Parent ("Merger Sub"), the Company and Merger Sub  
being hereinafter collectively referred to as the "Constituent Corporations."   

RECITALS
--------

          The Company desires to merge with Merger Sub and Merger Sub desires to
merge with the Company, all upon the terms and subject to the conditions of this
Agreement.                                                                      

The Company, Parent and Merger Sub desire to make certain   
representations, warranties, covenants and agreements in connection with the    
merger of the Company and Merger Sub, including the provision by Parent and     
Merger Sub of the funds necessary to accomplish such merger.                    

     The Company had 4,736,105 issued and outstanding shares of Common
Stock, par value $.01 per share ("Common Stock"), at June 30, 2000 which number 
has not changed materially since such date through the date hereof. The merger  
of the Company and Merger Sub will require the approval of this Agreement by the
affirmative vote of the holders of two-thirds of the outstanding shares of      
Common Stock.                                                                   

       Merger Sub has 1,000 issued and outstanding shares of Common Stock,
par value $.01 per share ("Merger Sub Common Stock"). The merger of the Company 
and Merger Sub will require the approval of this Agreement by the affirmative   
vote of the holders of two-thirds of the outstanding shares of Merger Sub Common
Stock.                                                                          

   The Board of Directors of Parent have approved and adopted this
Agreement. The Board of Directors of the Company have adopted this Agreement and
have resolved, subject to the terms of this Agreement, to recommend to the      
shareholders of the Company to vote to approve this Agreement in conjunction    
with their approval of the merger.                                              

   NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions herein        
contained, the parties hereto agree as follows:                                 

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ARTICLE I 

THE MERGER; CLOSING; EFFECTIVE TIME 

          1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.3) Merger Sub shall be merged    
with and into the Company and the separate corporate existence of Merger Sub    
shall thereupon cease (the "Merger"). The Company shall be the surviving        
corporation in the Merger (sometimes hereinafter referred to as the "Surviving  
Corporation") and shall continue to be governed by the laws of the State of New 
York, and the separate corporate existence of the Company with all its rights,  
privileges, immunities and powers and all its duties and liabilities as a New   
York corporation organized under New York Business Corporation Law ("BCL") shall
continue unaffected by the Merger, except as set forth in Section 2.1.          

      1.2  Closing. The closing of the Merger (the "Closing") shall take
place:                                                                          

           (a) On or before October 2, 2000, unless extended by both the
Company and the Parent.                                               

          (b) By the exchange of executed copies of the various Merger
     documents via facsimile, U.S. Mail, overnight courier or messenger service,
     on the first business day on or by which the last to be fulfilled or waived
 of the conditions set forth in Article VII hereof shall be fulfilled or
   waived in accordance with this Agreement; or at such other time and place
and/or on such other date as the Company and Parent may agree.        

         1.3  Effective Time. As soon as practicable following Closing, but in
no event more than twenty-four (24) hours following the Closing, the Company,   
Merger Sub and Parent will cause an executed Certificate of Merger (the "New    
York Certificate of Merger") to be filed with the Department of State of the    
State of New York (the "Department"). The Merger shall become effective at the  
time the New York Certificate of Merger is filed by the Department, and such    
time is hereinafter referred to as the "Effective Time."                        

          1.4  Subsequent Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of     
sale, assignments, assurances or any other actions or things are necessary or   
desirable to vest, perfect or confirm of record or otherwise in the Surviving   
Corporation its right, title or interest in, to or under any of the rights,     
properties or assets of either of the Constituent Corporations acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of  
the Surviving Corporation shall be authorized to execute and deliver, in the    
name and on behalf of each of the Constituent Corporations or otherwise, all    
such deeds,                                                                     

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bills of sale, assignments and assurances and to take and do, in the name and on
behalf of each of the Constituent Corporations or otherwise, all such other     
actions and things as may be necessary or desirable to vest, perfect or confirm 
any and all right, title and interest in, to and under such rights, properties  
or assets in the Surviving Corporation or otherwise to carry out this Agreement.

ARTICLE II  

CERTIFICATE OF INCORPORATION AND BYLAWS 
OF THE SURVIVING CORPORATION  

        2.1  Effect of Merger. The parties agree to the following provisions
with respect to the Merger:                                                     

           (a)  The name of the Surviving Corporation from and after the
    Effective Time shall continue to be "World of Science, Inc." until changed
in accordance with applicable law.                                    

        (b)  From and after the Effective Time, the Certificate of
  Incorporation of the Company shall be amended and restated to conform to
     the Certificate of Incorporation of the Merger Sub as in effect immediately
prior to the Effective Time.                                          

               (c)  The bylaws of the Merger Sub, as in effect immediately prior
 to the Effective Time, shall be the bylaws of the Surviving Corporation
  from and after the Effective Time until thereafter amended in accordance
     with law, the Certificate of Incorporation of the Surviving Corporation and
such bylaws.                                                          

ARTICLE III 

OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION 

      3.1 Officers and Directors. The president and the directors of the
Merger Sub (who are listed on Schedule 3.1 hereto) immediately prior to the     
Effective Time shall be the president and the directors of the Surviving        
Corporation, and the officers of the Company at the Effective Time (who are     
listed on Schedule 3.1) shall be the officers of the Surviving Corporation, from
and after the Effective Time, until their successors have been duly elected or  
appointed and qualified or until their earlier death, resignation and removal in
accordance with the Surviving Corporation's Certificate of Incorporation and    
Bylaws.                                                                         

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ARTICLE IV  

CONVERSION OR CANCELLATION OF SHARES
IN THE MERGER; APPRAISAL RIGHTS 

          4.1  Conversion or Cancellation of Shares. The manner of converting or
canceling shares of the Company and Merger Sub in the Merger shall be as        
follows:                                                                        
              (a)  At the Effective Time, each share of Common Stock ("Share")
    issued and outstanding immediately prior to the Effective Time (other than
 Shares owned by Merger Sub, Parent, any of Parent's subsidiaries or any
   subsidiary of the Company) shall, by virtue of the Merger and without any
  action on the part of the holder thereof, be converted into the right to
receive $1.15 in cash (the "Merger Consideration").                   

              (b)  At the Effective Time, each Share issued and outstanding at
the Effective Time and owned by Merger Sub, Parent or any of its      
   subsidiaries, and each Share issued and held in the Company's treasury at
   the Effective Time and each Share issued and outstanding at the Effective
  Time and owned by any subsidiary of the Company, shall, by virtue of the
   Merger and without any action on the part of the holder thereof, cease to
be outstanding, shall be canceled and retired without payment of any  
consideration therefor and shall cease to exist.                      

               (c)  At the Effective Time, each share of Merger Sub Common Stock
  issued and outstanding immediately prior to the Effective Time shall, by
  virtue of the Merger and without any action on the part of Merger Sub or
   the holders of such shares, convert into 1000 shares of Common Stock, par
value $.01 per share, of the Surviving Corporation.                   

4.2  Payment for Shares.                                    

             (a)  Immediately prior to or at the time of the Closing, Parent
shall, or shall cause the Merger Sub to, and the Merger Sub shall,    
     irrevocably deposit or cause to be deposited with American Stock Transfer &
  Trust Company or a similar institution acceptable to both the Parent and
   the Company (the "Disbursing Agent"), as agent for the holders of Shares,
cash in the aggregate amount equal to the product of (i) the number of
Shares issued and outstanding immediately prior to the Effective Time 
(other than the Shares owned by Merger Sub, Parent, any of Parent's   
subsidiaries or any subsidiary of the Company) and (ii) the Merger    
    Consideration (the "Aggregate Merger Consideration"). The Disbursing Agent
    shall, pursuant to irrevocable instructions, make the payments referred to
   in Section 4.2(b). Pending distribution pursuant to Section 4.2(b) hereof
     of the cash deposited with the Disbursing Agent, such cash shall be held in
    trust for the benefit of the holders of the Company's Shares and the funds
shall not                                                             

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be used for any other purposes, and the Merger Sub and Surviving      
   Corporation may direct the Disbursing Agent to invest such cash, provided
 that such investments: (i) shall be obligations of or guaranteed by the
United States of America, commercial paper obligations receiving the  
   highest rating from either Moody's Investors Services, Inc. or Standard &
    Poor's Corporation, or certificates of deposit, bank repurchase agreements
    or bankers acceptances of domestic commercial banks with capital exceeding
   $250,000,000 (collectively "Permitted Investments") or money market funds
that are invested solely in Permitted Investments; and (ii) shall have
   maturities that will not prevent or delay payments to be made pursuant to
Section 4.2(b) hereof. Each holder of a certificate or certificates   
 representing Shares cancelled at the Effective Time pursuant to Section
    4.1(a) hereof may thereafter surrender such certificate or certificates to
the Disbursing Agent, as agent for such holder of Shares, which shall 
  effect the exchange of such certificate or certificates on such holder's
behalf for a period ending six months after the Effective Time. Any   
    interest and other income resulting from such investments shall be paid to
the Surviving Corporation .                                           

       (b) After surrender to the Disbursing Agent of any certificate that
prior to the Effective Time shall have represented any Shares, the    
    Disbursing Agent shall promptly distribute to the individual, corporation,
    partnership, joint venture, association, joint stock company, trust, fund,
     unincorporated association, organization or other entity (each, a "Person")
in whose name such certificate shall have been registered a check     
 representing the amount of Merger Consideration into which Shares shall
have been converted at the Effective Time pursuant to Section 4.1(a)  
  hereof. Until so surrendered and exchanged, each such certificate shall,
    after the Effective Time, be deemed to represent only the right to receive
   such Merger Consideration, and until such surrender and exchange, none of
  the Merger Consideration shall be paid to the holder of such outstanding
  certificate in respect thereof. The Surviving Corporation shall promptly
    after the Effective Time, but in no event more than twenty-four (24) hours
after the Effective Time, cause to be distributed to such holders     
   appropriate materials (including a letter of transmittal and instructions
for its use in surrendering certificates representing the Shares in   
exchange for payment of the Merger Consideration) to facilitate such  
surrender.                                                            

       (c) If any cash deposited with the Disbursing Agent for purposes of
   payment in exchange for Shares remains unclaimed following the expiration
     of six months after the Effective Time, such cash shall be delivered to the
Surviving Corporation by the Disbursing Agent, and thereafter the     
    Disbursing Agent shall not be liable to any Persons claiming any amount of
   such cash, and the surrender and exchange shall be effected directly with
the Surviving Corporation (subject to applicable abandoned property,  
escheat and similar laws). No interest shall accrue or be payable with
respect to any amounts that any such holder shall be so entitled      

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to receive. The Surviving Corporation or the Disbursing Agent shall be
authorized to pay the cash attributable to any certificate theretofore
issued that has been lost or destroyed, upon receipt of satisfactory  
    evidence of ownership of the Shares represented thereby and of appropriate
indemnification.                                                      

     (d)  None of Parent, Merger Sub, the Surviving Corporation or the
Disbursing Agent shall be liable to any Person in respect of any      
certificates representing Shares (or dividends or distributions with  
 respect thereto) or cash delivered to a public official pursuant to any
    applicable abandoned property, escheat or similar law. If any certificates
representing Shares shall not have been surrendered prior to two years
after the Effective Time (or immediately prior to such earlier date on
which any cash, if any, in lieu of fractional Shares would otherwise  
 escheat to or become the property of any governmental entity), any such
   cash, dividends or distributions in respect of such certificate shall, to
the extent permitted by applicable law, become the property of the    
Surviving Corporation, free and clear of all claims or interest of any
Person previously entitled thereto.                                   

     4.3  Transfer of Shares After the Effective Time. No transfers of
Shares shall be made on the stock transfer books of the Surviving Corporation at
or after the Effective Time.                                                    

4.4  Appraisal Rights.                                      

             (a) Notwithstanding anything in this Agreement to the contrary,
any Shares ("Dissenting Shares") which are issued and outstanding     
    immediately prior to the Effective Time and which are held by shareholders
     of the Company who have timely filed with the Company, before the taking of
   the vote of the shareholders of the Company to approve this Agreement and
    the Merger, written objections to such approval stating their intention to
     demand payment for such Shares, and who have not voted such Shares in favor
 of the adoption of this Agreement will not be converted as described in
 Section 4.1(a) hereof, but will thereafter constitute only the right to
 receive payment of the fair value of such Shares in accordance with the
applicable provisions of Section 623 of the BCL (the "Appraisal Rights
   Provisions"); provided, however, that all Shares held by shareholders who
 shall have failed to perfect or who effectively shall have withdrawn or
  lost their rights to appraisal of such Shares under the Appraisal Rights
    Provisions shall thereupon be deemed to have been canceled and retired and
     to have been converted, as of the Effective Time, into the right to receive
the Merger Consideration, without interest, in the manner provided in 
 Section 4.1(a) hereof. Persons who have perfected statutory rights with
     respect to Dissenting Shares as aforesaid will not be paid by the Parent or
    the Surviving Corporation as provided in this Agreement and will have only
     such rights as are provided by the Appraisal Rights Provisions with respect
to such Dissenting Shares.                                            

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  Notwithstanding anything in this Agreement to the contrary, if Parent or
    Merger Sub abandons or is finally enjoined or prevented from carrying out,
     or the shareholders rescind their adoption of, this Agreement, the right of
each holder of Dissenting Shares to receive the fair value of such    
   Dissenting Shares in accordance with the Appraisal Rights Provisions will
terminate, effective as of the time of such abandonment, injunction,  
prevention or rescission.                                             

          (b)  The Company shall give Parent: (i) prompt notice of any
     demands for appraisal received by the Company, withdrawals of such demands,
  and any other instruments served pursuant to the BCL and received by the
Company; and (ii) the opportunity to direct all negotiations and      
proceedings with respect to demands for appraisal under the BCL. The  
  Company shall not, except with the prior written consent of Parent, make
  any payment with respect to any demands for appraisal or offer to settle
any such demands.                                                     

             (c)  Each dissenting shareholder who becomes entitled under the
   BCL to payment for Dissenting Shares shall receive payment therefor after
the Effective Time from the Surviving Corporation (but only after the 
   amount thereof shall have been agreed upon or finally determined pursuant
to the BCL) and such Dissenting Shares shall be canceled.             

ARTICLE V 

REPRESENTATIONS AND WARRANTIES

          5.1  Representations and Warranties of the Company. The Company hereby
represents and warrants to Parent and Merger Sub that:                          

        (a)  Corporate Organization and Qualification. Each of the
Company and its subsidiaries (as identified on Schedule 5.1(a)) is a  
     corporation duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation and is in good   
     standing as a foreign corporation in each jurisdiction where the properties
  owned, leased or operated, or the business conducted, by it require such
     qualification and where failure to so qualify or be in good standing in the
 aggregate is reasonably likely to have a material adverse effect on the
     financial condition, properties, businesses or results of operations of the
    Company and its subsidiaries taken as a whole. Each of the Company and its
  subsidiaries has the corporate power and authority and has all necessary
   licenses and other governmental authorizations to carry on its respective
     businesses as they are now being conducted. Except as set forth in Schedule
5.1(a), neither the Company nor any of its subsidiaries has received  
written notice that any such license, franchise, permit or other      
authorization is not valid and sufficient for such ownership and the  
conduct of such business. The                                         

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     Company has made available to Parent a complete and correct copy of each of
the Company's and its subsidiaries' Certificates of Incorporation, as 
     amended to date, and each of the Company's and its subsidiaries' Bylaws, as
     amended to date. Each of the Company's and its subsidiaries' Certificate of
Incorporation and Bylaws so delivered are in full force and effect. No
   jurisdiction in which either the Company or any subsidiary of the Company
     is authorized to do business specifically restricts in a manner material to
     the business of the Company and its subsidiaries, any of them from engaging
in any lines of business in which the Company or any subsidiary of the
Company is currently engaged .                                        

         (b) Authorized Capital. The authorized capital stock of the
Company consists of 10,000,000 Shares, of which 4,736,105 Shares were 
outstanding on June 30, 2000, 5,000,000 shares of preferred stock, par
   value $.01 per share, none of which were outstanding on June 30, 2000 and
     343,850 Shares were held by the Company as treasury stock on June 30, 2000.
   All of the outstanding Shares have been validly issued and are fully paid
    and nonassessable. The Company has no Shares reserved for issuance, except
    that, as of June 30, 2000, there were 308,500 Shares reserved for issuance
     (which amounts are sufficient to meet all such commitments) pursuant to the
   Company's stock option plans and other employee benefit plans (all option
    plans so referred to being called, collectively, the "Stock Option Plans")
and are identified on Schedule 5.1(b). Except as contemplated by this 
   Agreement and the related acquisition arrangements or otherwise set forth
   in the Company Reports, as hereinafter defined or Schedule 5.1(b), to the
   best knowledge of the Company there is no existing voting trust or voting
agreement with respect to the voting of 10,000 or more Shares.        

       (c) Corporate Authority. Subject only to approval of this
Agreement by the affirmative vote of the holders of two-thirds of the 
outstanding Shares, the Company has the requisite corporate power and 
    authority and has taken all corporate action necessary in order to execute
    and deliver this Agreement and to consummate the transactions contemplated
hereby. This Agreement is a valid and binding agreement of the Company
enforceable against the Company in accordance with its terms.         

           (d)  Compliance. Except as set forth in Schedule 5.1(d) or as
    otherwise specifically disclosed herein the execution and delivery of this
   Agreement by the Company do not, and the consummation of the transactions
     contemplated hereby by the Company will not, constitute or result in: (i) a
breach or violation of, or a default under, the Certificate of        
   Incorporation or Bylaws of the Company or any of its subsidiaries; (ii) a
breach or violation of, a default under or the triggering of any      
   obligations pursuant to, any of the Company's or any of its Subsidiaries'
employee benefit plans or arrangements, any grant, obligation or      

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    award made under any of the foregoing or any contract, arrangement, policy
     or understanding entered into with any employee or employees of the Company
     or any of its subsidiaries; or (iii) a breach or violation of, or a default
     under or an event which, with notice or lapse of time or both, would become
a default or permit the acceleration of any obligations under, or the 
creation of a lien, pledge, security interest or other encumbrance on 
   assets pursuant to (with or without the giving of notice or lapse of time
    or both), any provision of any obligation or guarantee for borrowed money,
   agreement, lease, contract, arrangement or other obligation ("Contracts")
  of the Company or any of its subsidiaries or any law, rule, ordinance or
regulation or judgment, decree, order, award or governmental or non-  
governmental permit or license to which the Company or any of its     
   subsidiaries or any of their respective properties and assets is subject,
     except in the case of clauses (ii) and (iii) above insofar as it relates to
     Contracts, for such breaches, violations, defaults, events or accelerations
which, alone or in the aggregate, are not reasonably likely to have a 
    material adverse effect on the financial condition, properties, businesses
or results of operations of the Company and its subsidiaries and its  
subsidiaries taken as a whole.                                        

         (e)  Company Reports; Financial Statements. The Company has
    delivered to Parent true and complete copies of: (i) the annual reports on
   Form 10-K for the fiscal years ending January 31, 1998, January 30, 1999,
January 29, 2000, as filed with the Securities and Exchange Commission
    ("SEC") by the Company; (ii) all other reports required to be filed by the
   Company pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
   of 1934 since January 31, 1998, including Form 10-Q for the first quarter
    ended April 29, 2000; (iii) all proxy statements furnished to shareholders
     of the Company since January 31, 1998; and (iv) all registration statements
and other documents as filed with the SEC by the Company under the    
   Securities Act of 1933 since January 31, 1998 (collectively, the "Company
   Reports"). As of their respective dates, except as otherwise disclosed in
   Schedule 5.1(e), the Company Reports did not contain any untrue statement
   of a material fact or omit to state a material fact required to be stated
   therein or necessary to make the statements made therein, in light of the
   circumstances in which they were made, not misleading; provided that this
 and any other representation or warranty herein relating to the Company
 Reports shall be interpreted as if Rule 412 under the Securities Act of
     1933 were directly applicable to the same. Each of the consolidated balance
 sheets of the Company included in or incorporated by reference into the
     Company Reports (including the related notes and schedules) fairly presents
    the consolidated financial position of the Company and its subsidiaries as
of its date and each of the consolidated statements of income,        
stockholders' equity and cash flow of the Company included in or      
   incorporated by reference into the Company Reports (including any related
notes and schedules) fairly presents the consolidated results of      
 operations, retained earnings and changes in financial position, as the
case may be, of the Company for                                       

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the periods set forth therein (subject, in the case of unaudited      
     statements, to normal year-end audit adjustments which will not be material
to the Company and its subsidiaries), in each case in accordance with 
generally accepted accounting principles ("GAAP") consistently applied
during the periods involved, except as may be noted therein or may be 
     permitted by Form 10-Q. Other than the Company Reports, the Company has not
     filed any other definitive reports or statements with the SEC since January
29, 2000.                                                             

         (f)  Absence of Certain Changes. Except as disclosed in the
    Company Reports or in Schedule 5.1(f), since January 29, 2000, the Company
  and its subsidiaries have conducted their respective businesses only in,
   and have not engaged in any material transaction other than according to,
the ordinary and usual course and there has not been: (i) any material
   adverse change in the financial condition, properties or ongoing business
of the Company or any its subsidiaries which could result in any such 
   change; (ii) in the case of the Company, any declaration setting aside or
   payment of any dividend or other distribution with respect to its capital
     stock; (iii) any change by the Company in accounting principles or methods;
  or (iv) any restatement or proposed restatement of the Company's balance
sheet as of January 29, 2000; provided, however, the expenses and fees
incurred by the Company in connection with this Agreement and the     
    transactions contemplated herein, including but not limited to, those fees
     and expenses identified in Schedule 6.13 to this Agreement, shall be deemed
 to have been incurred in the ordinary and usual course and shall not be
deemed to have a material adverse affect on the prospects, financial  
    condition or results of operations of the Company. Since January 29, 2000,
    except as provided for herein or as disclosed in the Company Reports or in
   Schedule 5.1(f) and other than in the ordinary course, there has not been
any increase in the compensation payable or to become payable by the  
  Company and its subsidiaries to any officer or employee, and the Company
    has not entered into or made any increase in any bonus, insurance, pension
     or other employee benefit plan, payment or arrangement made to, for or with
any such officers or employees.                                       

               (g)  Governmental Approvals. Other than the filings and approvals
    provided for in Section 1.3 and those required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), and the Securities
 Exchange Act of 1934 (the "Exchange Act"), no notices, reports or other
   filings are required to be made by the Company or any of its subsidiaries
with, nor are any consents, registrations, approvals, permits or      
authorizations required to be obtained by the Company from, any       
  governmental or regulatory authorities of the United States, the several
    States and any foreign jurisdiction in which the Company or any subsidiary
does business in connection with the execution and delivery of this   
Agreement by the Company and the consummation of the transactions     
contemplated hereby by the Company, the failure to make or            

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obtain any or all of which could have a material adverse effect on the
   financial condition, properties, business or results of operations of the
   Company and its subsidiaries, or which could prevent, delay or materially
burden the transactions contemplated by this Agreement.               

         (h)  Litigation and Liabilities. Except as disclosed in the
    Company Reports or in Schedule 5.1(h), there are no: (i) actions, suits or
proceedings pending or, to the best knowledge of the management of the
     Company, threatened against the Company or any of its subsidiaries; or (ii)
obligations or liabilities, whether or not accrued, contingent or     
 otherwise, or any facts or circumstances of which the management of the
Company is aware, including, without limitation, those relating to    
   environmental and occupational safety, and health matters, that, alone or
in the aggregate, could result in a claim against, obligation of or   
liability to the Company or any of its subsidiaries which could have a
   material adverse effect on the financial condition of the Company and its
subsidiaries; provided, however, the expenses and fees incurred by the
--------  -------                         
     Company in connection with this Agreement and the transactions contemplated
     herein, including but not limited to, those fees and expenses identified in
   Schedule 6.13 to this Agreement, shall be deemed to have been incurred in
  the ordinary and usual course and shall not be deemed to have a material
adverse affect on the prospects, financial condition or results of    
operations of the Company.                                            

        (i)  Labor and Employment. Except as set forth in Schedule
5.1(i): (i) no collective bargaining agreement presently covers any   
 employees of the Company or any subsidiary of the Company in connection
    with their employment by the Company or any subsidiary of the Company, nor
   is any currently being negotiated by the Company or any subsidiary of the
Company; (ii) there is no unfair labor practice complaint against the 
    Company or any subsidiary of the Company pending before the National Labor
 Relations Board or any comparable state, local or foreign agency; (iii)
 there is no labor strike, dispute, slowdown, stoppage or organizational
effort actually pending or, to the best knowledge of the Company,     
threatened against or involving the Company or any subsidiary of the  
Company; (iv) the Company has not classified or otherwise treated any 
    worker as an independent contractor; and (v) the Company does not have any
arrangement or agreement, pursuant to which it leases employees.      

(j)  Employee Benefits.                           

               (i) Except as set forth in Schedule 5.1(j), at the date
hereof, neither the Company, nor any trade or business (whether or not
incorporated) which is under control, or which is treated as a single 
employer, with Company under Section 414(b), (c), (m) or (o) of the   
    Internal Revenue Code of 1986, as amended (the "Code") ("ERISA Affiliate")
maintains, contributes or is                                          

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 obligated to contribute to any employee benefit plan under the Employee
    Retirement Income Security Act of 1974, as amended ("ERISA"), any employee
stock purchase, stock option, bonus or executive compensation plans,  
    programs, funds, trusts, arrangements and practices (such plans, programs,
funds, trusts, arrangements and practices of the Company and its ERISA
  Affiliates being referred to as the "Company Plans"), including employee
 benefit plans within the meaning set forth in Section 3(3) of ERISA, or
  other similar arrangements for the provision of benefits or perquisites.
    Neither the Company nor any ERISA Affiliate maintains, participates in, or
    contributes to, or has ever maintained, participated in, or contributed to
    any "Multiemployer Plan" within the meaning of Section 3(37) of ERISA, any
    "Multiple Employer Plan" within the meaning of Section 413(c) of the Code,
or any Company Plan subject to Title IV or Section 302 of ERISA.      

      (ii)  With respect to each Company Plan, the Company has
heretofore delivered to Parent true and complete copies of each of the
following documents: (i) a copy of the Company Plan and any amendments
thereto (or if the Company Plan is not a written plan, a description  
     thereof); (ii) a copy of the three most recent annual reports and actuarial
    reports, if required under ERISA, and the most recent report prepared with
respect thereto in accordance with Statement of Financial Accounting  
    Standards No. 87; (iii) a copy of the most recent summary plan description
required under ERISA with respect thereto; (iv) if the Company Plan is
  funded through a trust or any third party funding vehicle, a copy of the
trust or other funding agreement and the latest financial statements  
 thereof; and (v) the most recent determination letter received from the
Internal Revenue Service with respect to each Company Plan intended to
qualify under Section 401 of the Code.                                

               (iii) Except as set forth in Schedule 5.1(j), (i) there have been
no prohibited transactions within the meaning of Section 406 or 407 of ERISA or 
Section 4975 of the Code with respect to any of the Company Plans that could    
result in any penalties, taxes or liabilities; (ii) none of the Company Plans   
has incurred any "accumulated funding deficiency" (as defined in Section 302 of 
ERISA and Section 412 of the Code), whether or not waived, as of the last day of
the most recent fiscal year of each of the Company Plans ended prior to the date
of this Agreement; (iii) each of the Company Plans has been operated and        
administered in all material respects in accordance with applicable laws during 
the period of time covered by the applicable statute of limitations; (iv) each  
of the Company Plans which is intended to be "qualified" within the meaning of  
Section 401 (a) of the Code has been determined by the Internal Revenue Service 
to be qualified, and such determination has not been modified, revoked or       
limited by failure to satisfy any condition thereof or by a subsequent amendment
thereto or a failure to amend, except that it may be necessary to make          
additional                                                                      

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     amendments retroactively to maintain the "qualified" status of such Company
    Plans, and the period for making any such necessary retroactive amendments
   has not expired; and (v) there are no pending, or to the knowledge of the
Company, threatened or anticipated claims involving any of the Company
Plans other than claims for benefits in the ordinary course.          

            (iv)   Except as set forth in Schedule 5.1(j), no Company Plan
provides medical, surgical, hospitalization, death or similar benefits
   (whether or not insured) for employees or former employees of the Company
  or any Subsidiary for periods extending beyond their retirement or other
termination of service, other than: (i) coverage mandated by the      
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended    
("COBRA"), and other applicable law; (ii) death benefits under any tax
   qualified pension plan; or (iii) benefits the full cost of which is borne
  by the current or former employee (or beneficiary of such employee). The
Company and any ERISA Affiliate which maintains a "group health plan" 
  within the meaning of Section 5000(b)(1) of the Code, have complied with
  the notice and continuation requirements of Section 4980B of the Code or
Part 6 of Title I of ERISA and the applicable regulations thereunder. 

            (v)    Schedule 5.1(j) contains a true and complete summary or
  list of or otherwise describes all material employment contracts and all
 other employee benefit arrangements with "change of control" or similar
provisions and all severance, retirement or termination agreements,   
   arrangements, policies or practices with directors, executive officers or
any other employees.                                                  

         (vi)   Except as set forth in Schedule 5.1(j), there are no
 agreements which will or may provide payments to any officer, employee,
     independent contractor, shareholder, or highly compensated individual which
will be "parachute payments" under Code Section 280G that may be      
    nondeductible to the Company or subject to tax under Code Section 4999 for
    which the Company or any ERISA Affiliate would have withholding liability.

           (vii)  Except as set forth in Schedule 5.1(j) or as expressly
provided in this Agreement, the consummation of the transactions      
 contemplated by this Agreement will not, either alone or in combination
     with another event: (i) entitle any current or former employee, independent
  contractor or officer of the Company or any Subsidiary to severance pay,
     unemployment compensation or any other payment; or (ii) accelerate the time
    of payment or vesting, or increase the amount of compensation due any such
employee, independent contractor or officer.                          

          (viii) All Company Plans that are subject to the laws of any
     jurisdiction outside the United States are in material compliance with such

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applicable laws, including relevant tax laws relating thereto, and the
requirements of any trust deed under which they are established.      

          (k)  Brokers and Finders. Neither the Company nor any of its
officers, directors or employees has employed any broker or finder or 
     incurred any liability for any brokerage fees, commissions or finders' fees
  in connection with the transactions contemplated herein, except that the
Company has employed Raymond James & Associates, Inc. as its financial
     advisor, pursuant to an agreement dated January 3, 2000, a copy of which is
attached with Schedule 5.1(k).                                        

           (l)  Proxy Statement. The Company Information (as hereinafter
 defined) contained in the Company's Proxy Statement with respect to the
 shareholders meeting referred to in Section 6.3 (the "Proxy Statement")
will include in all material respects all statements required to be   
   contained therein and will not, either on the date the Proxy Statement is
   first mailed to shareholders or on the date of such shareholders meeting,
contain any statement which, at the time and in the light of the      
   circumstances under which it is made, is false or misleading with respect
    to any material fact or omit to state any material fact necessary in order
to make the statements therein not false or misleading or necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for such shareholders meeting which has become
    false or misleading. For the purposes of this Agreement, the term "Company
Information" means all information with respect to the Company and its
affiliates provided specifically for use in the Proxy Statement.      

               (m)  Tax Matters. Except as set forth in Schedule 5.1(m), each of
the Company and the subsidiaries of the Company has filed all Federal,
  state, local and foreign tax returns required to be filed by it and each
    such return is complete and accurate in all material respects. The Company
and the subsidiaries of the Company have paid all taxes of any nature 
  whatsoever, with any related penalties, interest and liabilities (any of
   the foregoing being referred to herein as a "Tax") that are shown on such
 tax returns as due and payable on or before the date hereof, other than
 such Taxes as are being contested in good faith and which are listed on
     Schedule 5.1(m). The provisions for current and deferred Taxes reflected on
     the Company's most recent balance sheet included in the Company Reports are
sufficient, as of the balance sheet date, in all material respects in 
accordance with generally accepted accounting principles consistently 
applied. Except as set forth in Schedule 5.1(m), there are no material
claims or assessments pending against the Company or any of the       
     subsidiaries of the Company for any alleged Tax deficiency, and the Company
does not know of any threatened Tax claims or assessments against the 
   Company or any of the subsidiaries of the Company, which, (i) in any case
involves amounts in excess of $10,000, or (ii) questions the          

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availability to the Company of its net operating loss carry-forward as
    disclosed in the Company Reports, and there are currently no agreements in
    effect with respect to the Company, any of the subsidiaries of the Company
or the affiliated group of which the Company is the common parent     
corporation to extend the period of limitations for the assessment or 
collection of any Tax imposed by the Code.                            

           (n)  Properties. Schedule 5.1(n) contains a true and complete
list and brief description of all real estate owned or leased by the  
   Company or any subsidiary of the Company. Except as set forth in Schedule
5.1(n) or the Company Reports: (i) the Company or a subsidiary of the 
    Company has good title to or a leasehold estate in all real properties and
  improvements listed in Schedule 5.1(n), as well as to or in any personal
   property, including, without limitation, software used by the Company and
its subsidiaries, free and clear of any mortgages, liens, security    
     interests or other encumbrances; (ii) all leases for leased premises remain
 in full force and effect and, except as otherwise set forth in Schedule
     5.1(n), have not been materially modified since January 29, 2000; and (iii)
 all leased premises are in good condition and repair, ordinary wear and
tear excepted, and there does not exist any condition which materially
    interferes with the economic value or use thereof, as such leased premises
  are currently being used. The Company has delivered to Parent a true and
   complete list and brief description of all items of machinery, equipment,
  motor vehicles, office furniture, fixtures and similar personal property
    owned or leased by the Company or any subsidiary of the Company having (in
    the case of any item owned) an original cost in excess of $10,000 per item
   and under which (in the case of any item leased) payments per item to the
owner thereof exceed $5,000 per annum. Except as set forth in such    
     Schedule, each of the items of machinery, equipment, motor vehicles, office
  furniture, fixtures and similar personal property identified in the list
   previously delivered to Parent is in good operating condition and repair,
 ordinary wear and tear excepted, and there does not exist any condition
     which materially interferes with the economic value or use thereof, as such
property is currently being used.                                     

               (o)  No Defaults. This Agreement does not contravene or otherwise
    avoid any existing contract or agreement by or with the Company. Except as
   set forth in Schedule 5.1(o), there is no material breach or default, and
no event which with notice or lapse of time or both would constitute a
     material breach or default, on the part of the Company or of any subsidiary
     of the Company, or to the best knowledge of the Company, of any other party
thereto, under any material contract (including, without limitation,  
  contracts with agents, managers and brokers), agreement, lease, license,
 mortgage, note, bond, indenture, guarantee, instrument or commitment to
  which the Company or any such subsidiary of the Company is a party or to
which the property of any thereof is subject.                         

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             (p)  Patents, Trademarks and Names. The Company or a subsidiary
  of the Company, as the case may be, owns all material rights in its name
    and logo, pays no royalty to anyone under any of them and has the right to
     bring actions for the infringement thereof. Except as set forth in Schedule
5.1(p), to the Company's knowledge the conduct by the Company and the 
subsidiaries of the Company of their business does not infringe in any
material respect upon or violate the trademarks, service marks, trade 
    names, trade secrets, copyrights, patents, licenses or rights of any other
person or entity, or the right of any other person or entity to the   
exclusive use of a name in any location.                              

             (q)  Insurance. The Company and its subsidiaries are adequately
    insured in accordance with retail industry practice in the following areas
(excluding policies issued by them and reinsurance or similar items in
     their favor): liability, theft, fidelity, casualty and other similar normal
  forms of business insurance held by the Company or any subsidiary of the
   Company. The Company has provided Parent with a true and complete list of
all policies of insurance held by the Company or any subsidiary of the
   Company (specifying the insurer, amount of coverage, annual premium, type
of insurance, policy number and any pending claims thereunder).       

               (r)  Contracts. Schedule 5.1(r) contains a true and complete list
of every agreement (including existing leases and lease proposals) and
instruments to which the Company or any subsidiary of the Company is a
party or by which any of them is bound and which are not otherwise set
     forth in the Schedules hereto which: (i) is material to the business of the
Company and its subsidiaries taken as a whole; (ii) contains covenants
 limiting the freedom of the Company or any subsidiary of the Company to
     compete in any line of business or with any person; (iii) would be effected
by the execution of this Agreement; (iv) relates to any consulting    
   agreement; or (v) involves a guarantee of payment or performance; in each
  case as the same may have been supplemented or amended prior to the date
hereof.                                                               

               (s)  Dealings with Officers and Directors. Except as set forth in
     Schedule 5.1(s), no Director or officer has a material conflicting interest
   against the Company and its subsidiaries taken as a whole. Except for the
employee benefit arrangements referred to in Section 5.1(j) and as    
   otherwise set forth in the Company Reports or in Schedule 5.1(s), neither
   the Company nor any subsidiary of the Company is a party to any agreement
     (other than sales commission agreements entered into in the ordinary course
of business) involving payments to any person or entity based on the  
    profits or gross revenues of the Company or any subsidiary of the Company.

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              (t)  Compliance with Applicable Laws; Licenses, etc. The present
conduct by each of the Company and each of its subsidiaries of their  
respective businesses does not violate any applicable United States   
    Federal, state or local, or foreign, law, statute, order, license or other
  governmental authorization, rule or regulation, in each case in a manner
  which, when taken together with any similar or related violations, could
have a material adverse effect on the financial condition, properties,
businesses, results of operations, or prospects of the Company and its
subsidiaries taken as a whole; and neither the Company nor any of its 
   subsidiaries has received written notice that any such violation is being
alleged.                                                              

               (u)  Environmental Matters. The Company is in material compliance
  with all applicable environmental laws which compliance includes, but is
  not limited to, the possession of all needed government permits required
under applicable environmental laws. Except as set forth in Schedule  
     5.1(u), there are no environmental claims threatened or pending against the
   Company or any of its subsidiaries or any facility maintained or operated
by the Company or its subsidiaries.                                   

        (v)  Disclosure. No representation or warranty made by the
Company in this Agreement or as provided herein contains any untrue   
     statement of a material fact or omits to state a material fact necessary in
order to make the statements contained therein, in the light of       
circumstances under which made, not false or misleading.              

        5.2  Representations and Warranties of Parent and Merger Sub. Parent
and Merger Sub jointly and severally represent and warrant to the Company that: 

               (a)  Corporate Organization and Qualification. Each of Parent and
  Merger Sub is a corporation duly organized, validly existing and in good
  standing under the laws of its respective jurisdiction of incorporation.
 Parent has made available to the Company a complete and correct copy of
    Parent's charter documents. Merger Sub has made available to the Company a
    complete and correct copy of Merger Sub's Certificate of Incorporation and
Bylaws. Parent's charter documents and Merger Sub's Certificate of    
Incorporation and Bylaws so delivered are in full force and effect.   

           (b)  Corporate Authority. Parent and Merger Sub each have the
     requisite corporate power and authority and have taken all corporate action
    necessary in order to execute and deliver this Agreement and to consummate
     the transactions contemplated hereby. This Agreement is a valid and binding
  agreement of Parent and Merger Sub enforceable against Parent and Merger
Sub in accordance with its terms.                                     

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              (c)  Compliance. The execution and delivery of this Agreement by
Parent and Merger Sub do not and the consummation of the transactions 
     contemplated hereby by Parent and Merger Sub will not, constitute or result
    in (i) a breach or violation of, or a default under, the charter documents
  of Parent or the Certificate of Incorporation or Bylaws of Merger Sub or
(ii) a breach or violation of, a default under or an event which, with
notice or lapse of time or both would become a default or permit the  
  acceleration of any obligation under, or the creation of a lien, pledge,
security interest or other encumbrance on assets pursuant to (with or 
  without the giving of notice or the lapse of time), any provision of any
    Contract of Parent or Merger Sub or any law, ordinance, rule or regulation
or judgment, decree, order, award or governmental or non-governmental 
    permit or license to which Parent or Merger Sub or any of their respective
     properties and assets is subject, except, in the case of clause (ii) above,
     for such breaches, violations, defaults or accelerations which, alone or in
    the aggregate, are not reasonably likely to have a material adverse effect
 on the consummation of the transactions contemplated by this Agreement.

              (d)  Governmental Approvals. Other than the filings provided for
     in Section 1.3, and those required under the HSR Act, and the Exchange Act,
   no notices, reports or other filings are required to be made by Parent or
     Merger Sub with, nor are any consents, registrations, approvals, permits or
  authorizations required to be obtained by Parent or Merger Sub from, any
  governmental or regulatory authorities of the United States, the several
   States and any foreign jurisdictions in connection with the execution and
     delivery of this Agreement by Parent and Merger Sub and the consummation of
    the transactions contemplated hereby by Parent and Merger Sub, the failure
   to make or obtain any or all of which could prevent, materially hinder or
materially burden the transactions contemplated by this Agreement.    

        (e)  Financing. Parent will use its best efforts to obtain
     available financing by August 25, 2000 to ensure that Parent and Merger Sub
    each fulfill and satisfy their respective obligations under this Agreement
 and to ensure the consummation of the transactions contemplated hereby,
     including (but not limited to) Parent's or Merger Sub's deposition of cash,
in an amount equal to the Aggregate Merger Consideration, with the    
   Disbursing Agent in accordance with Section 4.2(a) for the payment of the
Aggregate Merger Consideration in accordance with Sections 4.1(a) and 
4.2(a) of this Agreement.                                             

            (f)  Proxy Statement. The Acquiror Information (as hereinafter
defined) contained in the Proxy Statement will include in all material
respects all statements required to be contained therein and will not,
   either on the date the Proxy Statement is first mailed to shareholders or
     on the date of the shareholders meeting referred to in Section 6.3, contain
any statement which, at the time and in                               

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the light of the circumstances under which it is made, is false or    
    misleading with respect to any material fact or omit to state any material
fact necessary in order to make the statements therein not false or   
misleading or necessary to correct any statement in any earlier       
communication with respect to the solicitation of proxies for such    
     shareholders meeting which has become false or misleading. For the purposes
  of this Agreement, the term "Acquiror Information" means all information
     with respect to Parent, Merger Sub and its affiliates, the financing of the
   transactions contemplated hereby, any securities of Parent or Merger Sub,
 the plans of Parent with respect to the Surviving Corporation after the
Effective Time and any other written information concerning Parent or 
Merger Sub or any of its affiliates specifically for use in the Proxy 
Statement.                                                            

             (g)  Form S-2 Status and Annual Report Compliance. Parent meets
     the requirements for use of Form S-2 of the Securities Act of 1933, and its
1999 Annual Report to Shareholders, at the time of its original       
preparation, met the requirements of Rule 14a-3 of the Exchange Act.  

               (h)  Disclosure. No representation or warranty made by the Parent
or the Merger Sub in this Agreement contains any untrue statement of a
material fact or omits a material fact necessary in order to make the 
   statements contained therein, in light of circumstances under which made,
not false or misleading.                                              

ARTICLE VI  

COVENANTS 

     6.1  Interim Operations of the Company. The Company covenants and
agrees that after the date hereof, and prior to the Effective Time (unless      
Parent shall otherwise agree in writing and except as otherwise contemplated by 
this Agreement):                                                                

            (a)  the business of the Company and its subsidiaries shall be
conducted only in the ordinary and usual course and, to the extent    
  consistent therewith, each of the Company and its subsidiaries shall use
    its best efforts to preserve its business organization intact and maintain
 its existing relations with customers, suppliers, employees, agents and
business partners;                                                    

             (b)  the Company shall not: (i) sell or pledge or agree to sell
    or pledge any stock owned by it in any of its subsidiaries; (ii) amend its
    Certificate of Incorporation or Bylaws; (iii) split, combine or reclassify
the outstanding Shares; or (iv) declare, set aside or pay any dividend
payable in cash, stock or property with respect to the Shares;        

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             (c)  neither the Company nor any of its subsidiaries shall: (i)
  issue, sell, pledge, dispose of or encumber any additional shares of, or
  securities convertible or exchangeable for, or options, warrants, calls,
   commitments or rights of any kind to acquire, any shares of capital stock
    of any class of the Company or its subsidiaries other than Shares issuable
pursuant to options or rights outstanding on the date hereof under the
   existing employee benefit plans of the Company and its subsidiaries; (ii)
  transfer, lease, license, sell, mortgage, pledge, dispose of or encumber
any assets other than in the ordinary and usual course of business, or
incur or modify any indebtedness or other liability other than in the 
     ordinary and usual course of business; (iii) acquire directly or indirectly
   by redemption or otherwise any shares of the capital stock of the Company
    of any class; (iv) authorize any capital expenditure which is in excess of
   $10,000 individually or $50,000 in the aggregate, or make any acquisition
of, or investment in, assets or stock of any other person in excess of
    $10,000, individually or $50,000 in the aggregate; or (v) enter into a new
lease for permanent stores (for purposes of this Agreement, "permanent
   store" shall mean a store evidenced by a lease having a term of more than
12 months);                                                           

          (d)  the Company shall not enter into a lease for a seasonal
    store: (i) without first notifying Parent of its intention to do so, which
  notification shall identify the proposed location of the seasonal store;
    (ii) in a mall where Parent currently maintains or has executed a lease to
     operate a retail specialty Natural Wonders store; (iii) having a lease term
 beyond January 31, 2001; or (iv) in a mall where the prior year average
mall sales per square foot were below $225.                           

              (e)  neither the Company nor any of its subsidiaries shall grant
     any severance or termination pay to, or enter into any employment agreement
with any director, officer or other employee of the Company or such   
    subsidiaries (other than in the ordinary course of business and consistent
     with past practice or as otherwise provided in this Agreement); and neither
   the Company nor any of its subsidiaries shall adopt, or amend to increase
compensation or benefits payable under, any employment agreement or   
arrangement, bonus, deferred compensation, pension, retirement, profit
     sharing, stock option, stock purchase or other employee benefit plan (other
  than increases granted in the ordinary course of business and consistent
with past practice or as otherwise provided in this Agreement);       

        (f)  neither the Company nor any of its subsidiaries shall
  modify, amend or terminate any of its leases, contracts or agreements or
   waive, release or assign any rights or claims, except in the ordinary and
usual course of business;                                             

          (g)  neither the Company nor any subsidiary shall permit any
   insurance policy naming it as a beneficiary or a loss payable payee to be
canceled                                                              

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  or terminated without notice to Parent, except in the ordinary and usual
course of business;                                                   

               (h)  neither the Company nor any subsidiary shall acquire control
     or majority ownership of any other corporation, association, joint venture,
     partnership, business trust or other business entity, or acquire control or
    majority ownership of all or a substantial portion of the assets of any of
  the foregoing, or merge, consolidate or otherwise combine with any other
corporation; an d                                                     

             (i)  neither the Company nor any of its subsidiaries will enter
into an agreement to do any of the foregoing.                         

6.1A  Interim Operating Agreement.  Subject to the terms and
conditions of Article VI, the Company and Parent agree to use their best        
reasonable efforts to cooperate and coordinate with respect to the basic        
operating procedures described below, during the period following the execution 
of this Agreement and through and until the Effective Date.                     

         (a)  Immediately after the execution of this Agreement, the
   Company will provide Parent with access to certain operating information,
   including, but not limited to, documents and records relating to "open to
buy" positions, personnel, inventory and sales, borrowings and cash   
   position. During this operating period, the Parent's involvement would be
limited to information gathering. All business and operating decisions
     would be exclusively made by the Company, and the Parent would have no veto
or approval authority.                                                

               (b)  After the Parent has received a binding financing commitment
  in the amount necessary to make the payment described in Sections 4.1(a)
and 4.2(a) and released the financing contingency set forth in Section
     7(i), the Parent shall have the right to place one or more employees at the
     Company's headquarters office in Rochester, New York to review, monitor and
comment on open to buy and inventory positions. During this operating 
    period, the Parent's employees' involvement would be limited to monitoring
   and coordinating the future integration of the two companies' operations.
All business and operating decisions would be made exclusively by the 
Company, and the Parent would have no veto or approval authority.     

              (c) After the Parent has received a binding financing commitment
  in the amount necessary to make the payment described in Sections 4.1(a)
    and 4.2(a) and released the financing contingency, the proxy statement has
    been cleared by the SEC and the definitive proxy statement has been mailed
to the Company's shareholders, the Parent's employees on site at the  
  Rochester headquarters would assume responsibility, in coordination with
    the Company's management, for direct oversight of inventory decisions (not
purchasing decisions)                                                 

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and coordination of the shipment of merchandise out of the Company's  
distribution center and into the Company's stores.                    

        6.2  Acquisition Proposals. The Company will not, nor will it permit
any of its subsidiaries or any officer, director, employee or any investment    
banker, attorney, accountant or other agent retained by the Company or any of   
its subsidiaries to initiate or solicit, directly or indirectly, any inquiries  
or the making of any proposal with respect to any acquisition, business         
combination or purchase of all or any significant portion of the assets of, or  
any equity interest in, the Company or any subsidiary thereof, or otherwise     
facilitate any effort or attempt to do or seek any of the foregoing. The Company
will immediately cease and cause to be terminated any existing activities,      
discussions or negotiations with any parties conducted heretofore with respect  
to any of the foregoing. Nothing in this Section 6.2 or Section 6.1(h) shall    
prohibit the Company's Board of Directors from participating in any discussions,
negotiations or furnishing information in connection with, or from considering, 
reviewing and accepting an unsolicited third-party offer to acquire the Company.
The Company will notify Parent immediately if any such inquiries or proposals   
are received by, any such information is requested from, or any such            
negotiations or discussions are sought to be initiated or continued with the    
Company. The Company will promptly request or cause to be requested from each   
other person which has heretofore executed a confidentiality agreement in       
connection with its consideration of acquiring the Company the return all       
confidential information heretofore furnished to such person by or on behalf of 
the Company.                                                                    

6.3  Board of Directors Approval; Meeting of the Company's  
Shareholders; Preparation of Proxy Statement. The Company's Board of Directors  
have voted to approve this Agreement and the Company will take all action       
necessary in accordance with applicable law and its Certificate of Incorporation
and Bylaws to convene a meeting of holders of Shares as promptly as practicable 
to consider and vote upon the approval of this Agreement and the Merger.        
Concurrently with the signing of this Agreement, each member of the Board of    
Directors of the Company has entered into a voting agreement with the Parent to 
vote to approve the Merger and each shall recommend that the shareholders       
approve the Agreement and the Merger. At any such meeting of the Company all of 
the Shares then owned by Merger Sub and its affiliates will be voted in favor of
this Agreement and the Merger. The Proxy Statement shall not be filed, and no   
amendment or supplement to the Proxy Statement will be made by the Company,     
without the prior review and consultation with Parent and its legal counsel. The
Company and its legal counsel will promptly notify the Parent and its legal     
counsel of the receipt of any SEC comments on the Proxy Statement or any other  
communication received from the SEC with respect to the Proxy Statement or      
otherwise related to the Merger.                                                

       6.4  Letter of Company's Accountants. The Company shall cause to be
delivered to Parent a letter of the Company's independent auditors, dated a date
within                                                                          

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two business days before the Closing and addressed to the Company's Board of    
Directors, in form and substance reasonably satisfactory to Parent, to the      
effect that:                                                                    

           (a)  they are public accountants, independent with respect to
   both the Company and its subsidiaries, within the meaning of the Exchange
Act and the applicable published rules and regulations thereunder;    

               (b)  the financial statements of the Company and its consolidated
  subsidiaries examined by them comply as to form in all material respects
   with the applicable accounting requirement of the Exchange Act and of the
published rules and regulations thereunder; and                       

             (c)  at the request of the Company, they have: (1) reviewed the
unaudited financial statements of the Company and its consolidated    
subsidiaries, included in the Company's Form 10-Q for the period ended
April 29, 2000; and (2) consulted with certain officers of the Company
  responsible for financial and accounting matters as to certain specified
     matters, and, based on such procedures, nothing has come to their attention
which would cause them to believe that (A) any unaudited financial    
     statements of the Company and its consolidated subsidiaries included in the
     Company's Form 10-Q for the period ended April 29, 2000 do not comply as to
   form in all material respects with the applicable accounting requirements
    of the Exchange Act and of the published rules and regulations thereunder;
or (B) such unaudited financial statements are not fairly presented in
conformity with generally accepted accounting principles (except as   
permitted by Form 10-Q of the SEC) applied on a basis substantially   
 consistent with that of the audited financial statements of the Company
   included in the Company's Annual Report on Form 10-K for the period ended
  January 29, 2000; or (C) there were, except as set forth in such letter,
  any material decreases, as compared with the corresponding period in the
preceding year, in consolidated revenues or in the total or per share 
     amounts of income before extraordinary items, income before income taxes or
net income of the Company and its consolidated subsidiaries.          

          6.5  Filings; Other Action. Subject to the terms and conditions herein
provided, the Company, Parent and Merger Sub shall: (a) promptly make their     
respective filings and thereafter make any other required submissions under the 
HSR Act with respect to the Merger; and (b) use their best efforts to promptly  
take, or cause to be taken, all other action and do, or cause to be done, all   
other things necessary, proper or appropriate under applicable laws and         
regulations to consummate and make effective the transactions contemplated by   
this Agreement.                                                                 

       6.6  Access and Agreement to Cooperate. Upon reasonable notice, the
Company shall (and shall cause each of its subsidiaries to) afford officers,    
employees,                                                                      

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counsel, accountants and other authorized representatives of Parent             
("Representatives") access, during normal business hours throughout the period  
prior to the Effective Time, to its properties, books, Contracts and records    
(except for minutes of Board meetings relating to any confidential discussion of
this Agreement and the transactions contemplated thereby) and, during such      
period, the Company shall (and shall cause each of its subsidiaries to) furnish 
promptly to Parent all information concerning its business, properties and      
personnel as Parent may reasonably request, provided that no investigation      
pursuant to this Section 6.6 shall affect or be deemed to modify any            
representation or warranty made by the Company. Parent and Merger Sub will not, 
and will cause their respective Representatives not to, use any information     
obtained pursuant to this Section 6.6 or Section 6.1A for any purpose unrelated 
to the consummation of the transactions contemplated by this Agreement. Subject 
to the requirements of law, pending consummation of the transactions herein     
contemplated, Parent and Merger Sub will keep confidential, and will cause their
respective Representatives to keep confidential, all information and documents  
obtained pursuant to this Section 6.6 and Section 6.1A. Upon any termination of 
this Agreement, Parent will collect and deliver to the Company all such         
documents obtained by it or any of its Representatives or Merger Sub's          
Representatives then in their possession and any copies thereof. The second,    
third and fourth sentences of this Section 6.6 shall survive any termination of 
this Agreement. Company will not, and will cause its representatives not to, use
any information obtained from Parent in the course of negotiations relating to  
this Agreement or any transaction contemplated by this Agreement, for any       
purpose unrelated to the consummation of the transactions contemplated by this  
Agreement. Subject to the requirements of law, pending consummation of the      
transactions herein contemplated, the Company will keep confidential, and will  
cause its representatives to keep confidential, all such information and        
documents obtained from Parent. Upon any termination of this Agreement, the     
Company will collect and deliver to Parent all such documents obtained by it or 
any of its representatives then in their possession and any copies thereof. The 
obligations set forth in the preceding sentence of this Section 6.6 shall       
survive any termination of this Agreement.                                      

       6.7  Notification of Certain Matters. The Company shall give prompt
notice to Parent of: (a) any notice of, or other communication relating to, any 
breach or prospective breach of the representations made in Section 5.1(d)      
received by the Company or any of its subsidiaries subsequent to the date of    
this Agreement and prior to the Effective Time; (b) any material adverse change 
in the financial condition, properties or ongoing businesses of the Company and 
its subsidiaries or the occurrence of any event which, so far as reasonably can 
be foreseen at the time of its occurrence, could result in any such change; and 
(c) any event occurring subsequent to the date of this Agreement which would    
render any representation or warranty of the Company contained in this Agreement
untrue or inaccurate as of the date when made and, except for changes expressly 
contemplated by this Agreement and except as to representations and warranties  
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Closing, at and as of the Closing as if made on the Closing Date. Each of the   
Company and Parent shall give prompt notice to the other party of any notice or 
other communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated by 
this Agreement.                                                                 

        6.8  Publicity. The Company and Parent shall consult with each other
in issuing any press releases or otherwise making public statements with respect
to the transactions contemplated hereby and in making any filings with any      
federal or state governmental or regulatory agency or other proper authority.   

         6.9  Employee Benefits. Immediately prior to and conditional upon the
Closing, the Company shall take whatever action is necessary to cause the       
adoption of resolutions to terminate the Company's 401(k) Plan. The Company     
shall, within 90 days after the Closing, apply for a determination from the IRS 
that the termination of the Company's 401(k) Plan has not adversely affected its
qualified status under Section 401(a) of the Code. Upon receipt of a favorable  
IRS determination letter applicable to the termination of the Company's 401(k)  
Plan, the Parent, in its sole discretion, shall cause its 401(k) Plan to accept 
any voluntary rollover contribution or transfer from the Company's terminated   
401(k) Plan.                                                                    

 Following the Effective Time, the Company's employees will be
permitted to participate in the employee benefit plans of Parent as in effect on
the date thereof on terms substantially similar to those provided to employees  
of Parent.  Until such time as Parent causes employees of the Company to        
participate in the employee benefit plans of Parent, employees of the Company   
will continue to participate in the Company's benefit plans (other than its     
Stock Option Plans) on substantially similar terms to those in effect           
immediately prior to the Closing.                                               

       If any employee of the Company or any of the Company's subsidiaries
becomes a participant in any employee benefit plan, practice or policy of Parent
or any of its affiliates or the Surviving Corporation, such employee shall be   
given credit under such plan, to the extent permitted therein, for all service  
with the Company and any of the Company's subsidiaries prior to the Effective   
Time, for purposes of determining eligibility (including, without limitation,   
waiting periods) and vesting. In addition, if any employees of the Company or   
its subsidiaries employed as of the Closing Date become covered by a medical    
plan of Parent or any of its affiliates or the Surviving Corporation, to the    
extent permitted by the Parent's group insurance providers, such employees shall
be given credit for any co-payment or deductible paid under the Company's       
medical plan prior to the Closing.                                              

      6.10 Stock Options. On or prior to the Effective Time, the Company
shall take such actions as may be necessary such that, at the Effective Time,   
each stock option outstanding pursuant to the Stock Option Plans together with  
any rights related thereto                                                      

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("Options"), whether or not then exercisable, shall only entitle the holder     
thereof, upon surrender thereof, to receive, at or after the Effective Time, an 
amount in cash equal to the difference between the Merger Consideration per     
Share and the exercise price per Share of such Option multiplied by the number  
of Shares previously subject to such Option.                                    

     6.11 Indemnification. For six years after the Effective Time, the
Surviving Corporation and the Parent, jointly and severally, shall indemnify,   
defend and hold harmless the present and former officers and directors of the   
Company and its subsidiaries (an "Indemnified Party") against all losses,       
claims, damages or liabilities arising out of actions or omissions occurring on 
or prior to the Effective Time to the full extent permitted or required under   
New York law and the Company's Certificate of Incorporation and Bylaws in effect
at the date hereof, including provisions relating to advances of expenses       
incurred in the defense of any action or suit, provided that any determination  
required to be made with respect to whether an Indemnified Party's conduct      
complies with the standards set forth under New York law and the Company's      
Certificate of Incorporation and Bylaws shall be made by independent counsel    
selected by the Surviving Corporation and reasonably satisfactory to the        
Indemnified Party. Either the Parent or the Surviving Corporation shall maintain
the Company's existing officers' and directors' liability insurance ("D&O       
Insurance") for a period of six years after the Effective Time so long as the   
annual premium therefor is not in excess of twice the last annual premium paid  
prior to the date hereof (approximately $120,000) (the "Current Premium");      
provided that the Surviving Corporation or Parent, as the case may be, may      
substitute therefor policies for officers' and directors' liability insurance of
at least the same coverage and amounts containing terms and conditions which are
not less advantageous than the Company's existing D & O Insurance policy. This  
Section 6.11 shall survive the closing of the transactions contemplated hereby, 
and is expressly intended to be for the benefit of each of the Indemnified      
Parties and their heirs and representatives (each of whom shall be entitled to  
enforce this Section 6.11 against Parent, the Company, the Surviving Corporation
or any successors and assigns thereof) and shall be binding on all such         
successors and assigns of the Parent, Merger Sub, the Company and the Surviving 
Corporation. In connection with any liquidation of the Surviving Corporation,   
Parent shall expressly assume, and shall cause each of its direct and indirect  
subsidiaries to assume, the obligations of the Surviving Corporation under this 
Section 6.11. In the event that Parent or the Surviving Corporation or any of   
its successors or assigns: (i) consolidates with or merges into any other person
or entity and shall not be the continuing or surviving corporation or entity of 
such consolidation or merger; or (ii) transfers or conveys all or substantially 
all of its properties and assets to any person or entity, then and in each such 
case, proper provision shall be made so that the successors and assigns of      
Parent, Surviving Corporation and their respective successors or assigns, as the
case may be, assume the obligations set forth in this Section 6.11.             

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         6.12 Reports; Taxes; etc. Except as otherwise consented to in writing
by Parent, prior to the Effective Time of the Merger, the Company will, and will
cause each subsidiary of the Company to, duly and timely (by the due date or any
duly granted extension thereof) file all reports and returns required to be     
filed with Federal, state, local, foreign and other authorities.                

      6.13 Expenses. Subject to the terms and conditions of the sentence
immediately below, the Parent and the Company will each separately bear its own 
expenses incurred in connection with this Agreement or any transaction          
contemplated by this Agreement. The Parent agrees to pay all reasonable,        
documented costs and expenses incurred by the Company in connection with the    
Merger in the following amounts and at the following times: (a) $150,000 upon   
the filing of the preliminary proxy statement with the SEC; and (b) $250,000    
upon the clearance of the proxy statement by the SEC and the mailing of the     
definitive proxy statement to the Company's shareholders. The Parent            
acknowledges that if the Merger is completed as contemplated by this Agreement, 
the Company will have incurred expenses in connection with this Agreement and   
any transaction contemplated by this Agreement, including (but not limited to)  
the fees identified on Schedule 6.13 and that such fees and/or expenses will be 
borne by the Surviving Corporation and Parent, and will have no affect on the   
Merger Consideration and Parent's or Merger Sub's obligation to pay the Merger  
Consideration as contemplated in Section 4.2(b) of this Agreement.              

    6.14 Further Assurances. Each party hereto agrees to execute and
deliver such instruments and take such other actions as the other parties may   
reasonably require in order to carry out the intent of this Agreement.          

ARTICLE VII 

CONDITIONS  

7.1  Conditions to Obligations of Parent and Merger Sub. The
respective obligations of Parent and Merger Sub to consummate the Merger are    
subject to the fulfillment of each of the following conditions, any or all of   
which may be waived in whole or in part by Parent or Merger Sub, as the case may
be, to the extent permitted by applicable law:                                  

              (a)  Shareholders' Approval. This Agreement shall have been duly
     approved by the required shareholder vote of the Company in accordance with
applicable law and the Certificate of Incorporation and Bylaws of the 
Company.                                                              

         (b)  No Material Adverse Change. There shall be no material
adverse change in the prospects, financial condition or results of    
operations of the                                                     

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     Company between January 29, 2000 and the Closing Date, except as previously
disclosed to the Parent prior to the execution of this Agreement.     

      (c)  Fairness Opinion of Raymond James & Associates. The
 Company's Board of Directors shall have received a written opinion from
     Raymond James & Associates that the consideration to be paid to the Company
     in connection with the Merger is fair from a financial point of view to the
shareholders of the Company.                                          

              (d)  Litigation. There shall not be in effect, nor threatened by
   any court or governmental or regulatory agency of competent jurisdiction,
any preliminary or permanent injunction or other order of a court or  
    governmental or regulatory agency of competent jurisdiction directing that
the Merger not be consummated (including any such threatened item, an 
"Order").                                                             

            (e)  Opinion of Counsel to the Company. At the Closing, Parent
    and Merger Sub shall have received from Harris Beach & Wilcox LLP or other
    counsel of the Company satisfactory to the Parent and Merger Sub a written
   opinion, dated as of the date of the Closing, substantially to the effect
that:                                                                 

           (i)   Each of the Company and its subsidiaries is a
  corporation duly organized, validly existing, and in good standing under
the laws of its respective jurisdiction of incorporation and has all  
requisite corporate power and authority to own, lease and operate its 
properties and to conduct its business.                               

                  (ii)  Since the date of this Agreement, there have been no
changes in the authorized capital stock of the Company, and all of the
     issued and outstanding Shares, as constituted just prior to the time of the
Closing, were duly authorized, validly issued, fully paid and         
nonassessable.                                                        

                   (iii) The Company has the corporate power and has taken all
requisite corporate action required of it to effect the Merger in     
   accordance with the terms of this Agreement. This Agreement has been duly
executed and delivered by the Company and, assuming due authorization,
    execution and delivery by Parent and Merger Sub, respectively, constitutes
the legal, valid and binding obligation of the Company.               

             (iv)  The execution, delivery and performance of this
  Agreement by the Company and the consummation of the transactions on the
 part of the Company contemplated hereby, will not result in any breach,
  violation, default or acceleration of obligations under any provision of
  its Certificate of Incorporation or Bylaws, or, to the best knowledge of
     such counsel, without independent investigation, of any judgment, decree or
    order of any court or administrative agency having jurisdiction, or of any
mortgage, indenture, loan                                             

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  agreement or other instrument evidencing indebtedness or the guaranty of
     indebtedness for money borrowed, or of any other material agreement, lease,
license or other instrument applicable to the Company.                

           (v)   To the best knowledge of such counsel without
independent investigation, all consents or approvals by governmental  
authorities or other parties which are required in connection with the
consummation by the Company of the transactions contemplated by this  
Agreement have been obtained.                                         

             (vi)  Such counsel has not independently verified the
accuracy, completeness or fairness of the information in the Proxy    
    Statement, although such counsel has generally reviewed and discussed such
    information, insofar as it relates to the Company, with representatives of
  the Company and such counsel is familiar with this Agreement. Based upon
and subject to the foregoing, such counsel believes (but expresses no 
opinion) that as of the date of its mailing and as of the date of the 
shareholders meeting, the Proxy Statement (except for the financial   
statements, financial projections and other financial data included   
     therein, and except for information included therein with respect to Parent
    and Merger Sub, as to which such counsel expresses no opinion), appears on
 its face to be appropriately responsive in all material respects to the
requirements of the Exchange Act.                                     

               (f)  Other Obligations. The representations and warranties of the
    Company contained in this Agreement shall be in all material respects true
 and accurate as of the date when made and, except for changes expressly
contemplated by this Agreement and except as to representations and   
  warranties which are expressly limited to a state of facts existing at a
    time prior to the Closing, at and as of the Closing as if made on the date
   of Closing. The Company shall have performed and complied in all material
    respects with each and every covenant, agreement and condition required by
  this Agreement to be performed or complied with by it prior to or on the
Closing Date. The Company shall have furnished the Parent with a      
   certificate of the Company signed on its behalf by its Chairman and Chief
Executive Officer that this condition has been complied with.         

              (g)  Other Approvals and Consents. All approvals of applications
   to public authorities, Federal, state, local or foreign, and all consents
or approvals of any nongovernmental persons, the granting of which is 
necessary for the consummation of the Merger or for preventing the    
     termination of any right, privilege, license or agreement of the Company or
    any subsidiary of the Company which is material to the Company's business,
   or any material loss or disadvantage to Parent or the Company's business,
by reason of the Merger, shall have been obtained, no such consents or
approvals shall have imposed any terms or conditions other than those 
generally and ordinarily contained in all such consents               

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     and approvals or such as are not unduly burdensome to Parent or Merger Sub,
and all waiting periods specified by law shall have passed.           

            (h)  Assumption of Employment and Compensation Agreements. The
    Parent shall have executed and delivered the Assumption and Acknowledgment
of Entitlement agreements relating to Fred H. Klaucke's employment    
   agreement and Charles A. Callahan's and Christine M. Luchi's compensation
     agreements substantially similar to the forms attached to this Agreement as
Exhibit A.                                                            

             (i)  Financing. Prior to August 25, 2000, the Parent shall have
    obtained the necessary financing to make the payment described in Sections
4.1(a) and 4.2(a) of this Agreement.                                  

               (j) Accountant's Letter. Parent shall have received a copy of the
     letter of the Company's independent auditors dated the Closing Date in form
and substance reasonably satisfactory to Parent, making the statements
required by Section 6.4 on the basis of procedures set forth therein  
  carried out by them to a specified date not more than five business days
prior to the Closing Date.                                            

        7.2 Conditions to Obligations of the Company. The obligations of the
Company to consummate the Merger are subject to the fulfillment of each of the  
following conditions, any or all of which may be waived in whole or in part by  
the Company to the extent permitted by applicable law:                          

              (a)  Shareholders' Approval. This Agreement shall have been duly
     approved by the required shareholder vote of the Company in accordance with
applicable law and the Certificate of Incorporation and Bylaws of the 
Company;                                                              

              (b)  Litigation. There shall not be in effect, nor threatened by
   any court or governmental or regulatory agency of competent jurisdiction,
any Order; and                                                        

              (c)  Opinion of Counsel to Parent and Merger Sub. At the Closing
  the Company shall have received from Sheppard, Mullin, Richter & Hampton
  LLP, counsel for Parent and Merger Sub a written opinion dated as of the
    date of the Closing, which opinion is substantially to the effect that (it
is agreed that with respect to matters of New York law, the opinion of
 Sheppard, Mullin, Richter & Hampton LLP, may rely on the opinion of New
York counsel reasonably satisfactory to the Company):                 

            (i)  Parent is a corporation duly organized, validly
   existing and in good standing under the laws of Delaware. Merger Sub is a
corporation                                                           

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     duly organized, validly existing and in good standing under the laws of its
State of Incorporation .                                              

                   (ii)  Each of Parent and Merger Sub has the corporate power
   and has taken all requisite corporate action required of it to effect the
   Merger in accordance with the terms of this Agreement. This Agreement has
been duly executed and delivered by each of Parent and Merger Sub and,
assuming due authorization, execution and delivery by the Company,    
   constitutes the legal, valid and binding obligation of each of Parent and
Merger Sub.                                                           

             (iii) The execution, delivery and performance of this
Agreement by each of Parent and Merger Sub and the consummation of the
transactions on the part of each of Parent and Merger Sub contemplated
   hereby, will not result in any breach, violation, default or acceleration
   of obligations under any provision of its respective charter documents or
 by-laws (to be specifically enumerated in such opinion) or, to the best
     knowledge of such counsel, of any judgment, decree or order of any court of
   administrative agency having jurisdiction, or of any mortgage, indenture,
    loan agreement or other instrument evidencing indebtedness or the guaranty
 of indebtedness for money borrowed, or of any other material agreement,
 lease, license or other instrument applicable to Parent or Merger Sub .

                    (iv)  To the best knowledge of such counsel, all consents or
   approvals by governmental authorities or other parties which are required
     in connection with the consummation by each of Parent and Merger Sub of the
transactions contemplated by this Agreement have been obtained.       

           (d)  Other Obligations. The representations and warranties of
     Parent and Merger Sub contained in this Agreement shall be true and correct
  as of the date when made and as of the Closing as if made on the date of
     Closing. The Parent and Merger Sub shall have performed and complied in all
 material respects with each and every covenant, agreement and condition
    required by this Agreement to be performed or complied by them prior to or
    on the Closing. The Parent and Merger Sub shall have furnished the Company
with a certificate corresponding to that called for by Section 7.1(f).
Additionally, the condition of Section 7.1(g) shall be satisfied.     

             (e)  Financing. Prior to August 25, 2000, the Parent shall have
    obtained the necessary financing to make the payment described in Sections
4.1(a) and 4.2(a) of this Agreement.                                  

           (f)  Funds Deposited with Disbursing Agent. Parent shall have
   obtained the necessary financing to make the payment described in Section
4.1(a) of this Agreement and shall have deposited, or caused to be    
deposited, in trust                                                   

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    with the Disbursing Agent, an amount of cash equal to the Aggregate Merger
   Consideration for payment to the Company shareholders pursuant to Section
4.2.                                                                  

            (g)  Assumption of Employment and Compensation Agreements. The
    Parent shall have executed and delivered the Assumption and Acknowledgment
of Entitlement agreements relating to Fred H. Klaucke's employment    
    agreement and Charles A. Callahan's and Christine M. Lucchi's compensation
     agreements substantially similar to the forms attached to this Agreement as
Exhibit A.                                                            

      (h)  Fairness Opinion of Raymond James & Associates. The
 Company's Board of Directors shall have received a written opinion from
     Raymond James & Associates that the consideration to be paid to the Company
     in connection with the Merger is fair from a financial point of view to the
shareholders of the Company.                                          

ARTICLE VIII  

TERMINATION 

        8.1  Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before 
or after the approval by holders of Shares, by the mutual consent of Parent and 
the Company, by action of their respective Boards of Directors. For purposes of 
this Article VIII and Section 9.2, no action taken by the Board of Directors of 
the Company shall be effective unless any such action is approved by the        
affirmative vote of at least a majority of the Board of Directors at the time of
such vote who were also members of the Board of Directors of the Company on the 
date hereof.                                                                    

      8.2  Termination by either Parent or the Company. It is recognized
that in Section 6.5 the parties have agreed to use their best efforts to take   
actions necessary to make effective the transactions contemplated by this       
Agreement. This Agreement may be terminated and the Merger may be abandoned by  
action of the Board of Directors of either Parent or the Company if: (a) the    
financing contingency described in Sections 7.1(i) and 7.2(e) has not been      
waived in writing by Parent by August 25, 2000; (b) the Merger has not occurred 
by October 2, 2000 (unless extended by the mutual consent of the parties); (c)  
the shareholders of the World of Science do not approve the Merger; or (d) the  
Effective Time has not occurred, provided that in order to exercise the right of
termination the party concerned shall not then be in breach of this Agreement.  
The Board of Directors of the Company may terminate this Agreement and may      
abandon the Merger in the event the Board of Directors determines, consistent   
with its fiduciary duties, to accept an unsolicited third-party offer.          

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        8.3  Termination by Parent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Closing, before or after the   
approval by holders of Shares, by action of the Board of Directors of Parent, if
there is a material breach of any of the representations and warranties of the  
Company or if the Company shall have failed to comply in any material respect   
with any of its covenant or agreements contained herein to be complied with or  
performed by the Company at or prior to such date of termination.               

         8.4  Termination by the Company. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Closing, before or after   
the approval by holders of Shares, by action of the Board of Directors of the   
Company, if there is a material breach of any of the representations and        
warranties of Parent or Merger Sub or if Parent or Merger Sub shall have failed 
to comply in any material respect with any of its covenants and agreements      
contained herein to be complied with or performed by Parent or Merger Sub at or 
prior to such date of termination.                                              

          8.5 Effect of Termination and Abandonment. In the event of termination
of this Agreement and abandonment of the Merger pursuant to this Article VIII,  
except as otherwise provided herein, no party hereto (or any of its directors or
officers) shall have any liability or further obligation to any other party to  
this Agreement, except that nothing herein will relieve any party from liability
for any willful breach of this Agreement. In the event the Company violates the 
exclusivity provisions of Section 6.2 of this Agreement or the Company closes a 
transaction for the acquisition of all or substantially all of the Company's    
Shares or assets arising out of an unsolicited third-party purchase offer made  
prior to the Closing, the Company shall pay the Parent a breakup fee of $150,000
within 30 days of such violation or closing.                                    

ARTICLE IX  

MISCELLANEOUS AND GENERAL 

       9.1  Survival. The agreements of the Company, Parent and Merger Sub
contained in this Article IX and in Sections 1.3, 1.4, 4.1, 4.2, 4.3, 4.4, 6.9, 
6.11, 6.13 and 9.8 shall survive the consummation of the Merger. To the extent  
provided therein, the agreements of the Company, Parent and Merger Sub contained
in Sections 6.6, 6.13, 8.5 and 9.8 shall survive the termination of this        
Agreement. All other representations, warranties, agreements and covenants in   
this Agreement shall not survive the consummation of the Merger.                

     9.2  Amendment and Waiver. Subject to applicable law, at any time
prior to the Effective Time (notwithstanding any shareholder approval), if      
authorized by their respective Boards of Directors: (i) the parties hereto may, 
by written agreement, modify, amend or supplement any term or provisions of this
Agreement; and (ii) any term or                                                 

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provisions of this Agreement may be waived in writing by the party which is, or 
whose shareholders or directors are, entitled to the benefits thereof; provided,
however, that after the approval of this Agreement by the shareholders of the   
Company, no such amendment, modification or supplement shall reduce or change   
the Merger Consideration into which each Share will be converted upon           
consummation of the Merger or shall otherwise materially change the terms of    
this Agreement, such that shareholder approval would be required.               

      9.3  Counterparts. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each such counterpart  
being deemed to be an original instrument, and all such counterparts shall      
together constitute the same agreement.                                         

         9.4  Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware.                           

          9.5  Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered    
personally or sent by registered or certified mail, postage prepaid, if to      
Parent or Merger Sub, addressed to Parent or Merger Sub at 4209 Technology      
Drive, Fremont, CA 94538, Attention: Peter G. Hanelt (with copies to Sheppard,  
Mullin, Richter & Hampton, LLP, Four Embarcadero Center, San Francisco, CA      
94111, Attention: A. John Murphy, Esq. and Renaissance Capital Group, Inc., 200 
West Madison Street, Suite 3450, Chicago, Illinois 60606, Attention: Michelle A.
Facktor; and if to the Company, addressed to the Company at 900 Jefferson Road, 
Building 4 Rochester, NY 14623, Attention: Chairman of the Board (with copies to
Thomas E. Willett, Esq., Harris Beach & Wilcox, LLP, 130 East Main Street,      
Rochester, NY 14604 and Thomas W. Mullins, Raymond James & Associates, Inc., 880
Carillon Parkway, St. Petersburg, Florida 33716, or to such other persons or    
addresses as may be designated in writing by the party to receive such notice). 

          9.6  Entire Agreement, etc. This Agreement together with the Schedules
and Exhibits attached hereto, (a) constitutes the entire agreement, and         
supersedes all other prior agreements and understandings, both written and oral,
among the parties, with respect to the subject matter hereof, and this Agreement
shall continue in force and effect in accordance with its terms, and (b) shall  
not be assignable by operation of law or otherwise and is not intended to create
any obligations to, or rights in respect of, any persons (except as specifically
mentioned herein) other than the parties hereto; provided, however, that Parent 
may designate, by written notice to the Company, another directly or indirectly 
wholly-owned subsidiary of Parent to be a Constituent Corporation in lieu of    
Merger Sub, in the event of which, all references herein to Merger Sub shall be 
deemed references to such other subsidiary except that all obligations of Merger
Sub and all representations and warranties made herein with respect to Merger   
Sub as of the date of                                                           

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this Agreement shall be deemed to be the obligations of, and the representations
and warranties made with respect to, such other subsidiary as of the date of    
such designation.                                                               

     9.7  Definition of "Subsidiary." When a reference is made in this
Agreement to a subsidiary of a party, the word "subsidiary" means any           
corporation or other organization whether incorporated or unincorporated of     
which at least a majority of the securities or interests having by the terms    
thereof ordinary voting power to elect a majority of the board of directors or  
others performing similar functions with respect to such corporation or other   
organization is directly or indirectly owned or controlled by such party or by  
any one or more of its subsidiaries, or by such party and one or more of its    
subsidiaries.                                                                   

          9.8  Obligation of Parent. Whenever this Agreement requires Merger Sub
or any assignee to take any action, such requirement shall be deemed to include 
an undertaking on the part of Parent to itself take, or cause Merger Sub, to    
take such action, and from and after the Effective Time, any requirement of the 
Surviving Corporation to take any action, shall be deemed to include an         
undertaking on the part of Parent to cause Surviving Corporation to take such   
action.                                                                         

        9.9  Consent to Jurisdiction. Each party irrevocably agrees that any
legal action or proceeding against it arising out of or in connection with this 
Agreement or for enforcement of any judgment rendered in any such action or     
proceeding may be brought in the United States courts located in the City of    
Wilmington, Delaware, and each party hereby irrevocably accepts and submits to  
the jurisdiction of each of the aforesaid courts in person, generally and       
unconditionally with respect to any such action or proceeding. For the purposes 
of any such action or proceeding instituted in such courts, (i) Parent and      
Merger Sub each hereby irrevocably designates Sheppard, Mullin, Richter &       
Hampton LLP, Four Embarcadero Center, San Francisco, California 94111,          
Attention: A. John Murphy, Esq. and the Company hereby irrevocably designates   
Harris Beach & Wilcox, The Granite Building, 130 East Main Street, Rochester,   
New York 14604, Attention: Thomas E. Willett, Esq., as their respective agents  
to receive for and on their behalf service of process therein and each agrees to
take any action necessary to continue such designation in full force and effect,
(ii) each party irrevocably consents to the service of process by the mailing of
a copy thereof, by registered mail (or equivalent, airmail if overseas), postage
prepaid, to the party being served, and (iii) each party irrevocably waives, to 
the fullest extent permitted by law, any immunity from such action or           
proceeding, any objection which it may now or hereafter have to the venue of any
such action or proceeding brought in any such court and any claim that any such 
action or proceeding brought in such court has been brought in an inconvenient  
forum. Nothing in this Section shall affect the right of any party to serve     
legal process in any other manner permitted by law or affect the right of any   
party to bring any action or proceeding against any other party hereto or its   
property in the courts of any other jurisdiction.                               

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        9.10 Formation of Merger Sub. Parent covenants and agrees to use its
best efforts to form Merger Sub as soon as reasonably practicable. Parent shall 
cause Merger Sub to become a party to this Agreement immediately following      
Merger Sub's formation. The representations and warranties of Merger Sub made   
herein shall speak as of the date that Merger Sub executes and delivers this    
Agreement and as of the date of Closing as provided in Section 7.2(d).          

         9.11 Captions. The Article, Section and paragraph captions herein are
for convenience of reference only, do not constitute part of this Agreement and 
shall not be deemed to limit or otherwise affect any of the provisions hereof.  

 IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties acting by their duly authorized officers on the date   
first hereinabove written.                                                      

  WORLD OF SCIENCE, INC.

   By  /s/ Fred H. Klaucke
                            ----------------------------------------
                         President and Chief Executive Officer

 NATURAL WONDERS, INC.

   By  /s/ Peter G. Hanelt
                            ----------------------------------------
                         President and Chief Executive Officer

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                                                                         ANNEX B

August 4, 2000                                                                  

Board of Directors                                                              
World of Science, Inc.                                                          
900 Jefferson Road, Building 4                                                  
Rochester, NY  14623                                                            

Members of the Board:                                                           

You have requested our opinion as to the fairness, from a financial point of    
view, to the shareholders of the outstanding common stock, par value $0.01 (the 
"Common Stock") of World of Science, Inc. ("World of Science" or the "Company") 
of the consideration to be received by such holders in connection with the      
proposed merger (the "Merger") of the Company with Natural Wonders, Inc.        
("Natural Wonders") pursuant and subject to the Agreement and Plan of Merger    
between the Company and Natural Wonders (the "Merger Agreement"). The Merger    
Agreement provides, among other things, that each outstanding share of Common   
Stock will be converted into the right to receive $1.15 per share (the "Merger  
Consideration") from Natural Wonders upon the closing of the Merger.            

In connection with our review of the proposed Merger and the preparation of our 
opinion herein, we have, among other things:                                    

     1.   reviewed the financial terms and conditions as stated in the August 3,
    2000 draft of Merger Agreement and assumed the final form of the
  Merger Agreement would not vary in any respect material to our
analysis;                                                   

     2.   reviewed the audited financial statements of the Company as of and for
      the years ended January 29, 2000, January 30, 1999 and January 31,
      1998 and the unaudited financial statements for the quarters ended
April 29, 2000 and May 1, 1999;                             

    3.   reviewed the Company's Annual Reports filed on Form 10-K for the past
       three fiscal years ended January 29, 2000, as well as the Company's
Form 10-Q for the quarter ended April 29, 2000;             

   4.   reviewed other Company financial and operating information requested
          from and/or provided by the Company, including financial and operating
         projections, lease agreements and other documents related to World of
Science;                                                    

    5.   reviewed certain other publicly available information on the Company;
and                                                         

     6.   discussed with members of the senior management of the Company certain
          information relating to the aforementioned and any other matters which
we have deemed relevant to our inquiry.                     

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Board of Directors                                                              
World of Science, Inc.                                                          
August 4, 2000                                                                  
Page 2                                                                          

We have assumed and relied upon the accuracy and completeness of all information
supplied or otherwise made available to us by the Company or any other party, or
that was publicly available, and have not attempted to verify independently any 
of such information. We have not made or obtained an independent appraisal of   
the assets or liabilities (contingent or otherwise) of the Company. With respect
to financial forecasts and other information and data provided to or otherwise  
reviewed by or discussed with us, we have assumed that such forecasts and other 
information and data have been reasonably prepared in good faith on bases       
reflecting the best currently available estimates and judgments of management,  
and we have relied upon each party to advise us promptly if any information     
previously provided became inaccurate or was required to be updated during the  
period of our review.                                                           

Our opinion is based upon market, economic, financial and other circumstances   
and conditions existing and disclosed to us as of August 3, 2000 and any        
material change in such circumstances and conditions would require a            
reevaluation of this opinion, which we are under no obligation to undertake.    

We express no opinion as to the underlying business decision to effect the      
Merger, the structure or tax consequences of the Merger Agreement or the        
availability or advisability of any alternatives to the Merger. We did not      
structure the Merger or negotiate the final terms of the Merger. Our opinion is 
limited to the fairness, from a financial point of view, of the Merger to the   
shareholders of World of Science. We express no opinion with respect to any     
other reasons, legal, business, or otherwise, that may support the decision of  
the Board of Directors to approve or consummate the Merger.                     

In conducting our investigation and analyses and in arriving at our opinion     
expressed herein, we have taken into account such accepted financial and        
investment banking procedures and considerations as we have deemed relevant,    
including the review of (i) historical and projected revenues, operating        
earnings, net income and capitalization of the Company and certain other        
publicly held companies in businesses we believe to be comparable to the        
Company; (ii) the current and projected financial position and results of       
operations of the Company; (iii) the historical market prices and trading       
activity of the Common Stock of the Company; (iv) financial and operating       
information concerning selected business combinations which we deemed comparable
in whole or in part; (v) the amount of proceeds to common shareholders that     
would be expected from an orderly liquidation of the Company; and (vi) such     
other factors as were deemed appropriate.                                       

In arriving at this opinion, Raymond James did not attribute any particular     
weight to any analysis or factor considered by it, but rather made qualitative  
judgments as to the significance and relevance of each analysis and factor.     
Accordingly, Raymond James believes that its analyses must be considered as a   
whole and that selecting portions of its analyses, without considering all      
analyses, would create an incomplete view of the process underlying this        
opinion.                                                                        

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Board of Directors                                                              
World of Science, Inc.                                                          
August 4, 2000                                                                  
Page 3                                                                          

Raymond James & Associates, Inc. ("Raymond James") is actively engaged in the   
investment banking business and regularly undertakes the valuation of investment
securities in connection with public offerings, private placements, business    
combinations and similar transactions. Raymond James has been engaged to render 
financial advisory services to the Company in connection with the proposed      
Merger and will receive a fee for such services, which fee is contingent upon   
consummation of the Merger. Raymond James will also receive a fee upon the      
delivery of this opinion. In addition, the Company has agreed to indemnify us   
against certain liabilities arising out of our engagement.                      

In the ordinary course of our business, Raymond James may trade in the          
securities of the Company for our own account or for the accounts of our        
customers and, accordingly, may at any time hold a long or short position in    
such securities.                                                                

It is understood that this letter is for the information of the Board of        
Directors of the Company in evaluating the proposed Merger and does not         
constitute a recommendation to any shareholder of the Company regarding how said
shareholder should vote on the proposed Merger. This opinion is not to be quoted
or referred to, in whole or in part, without our prior written consent, which   
will not be unreasonably withheld; provided, however, that this letter may be   
reproduced in full in the Proxy Statement related to the Merger.                

Based upon and subject to the foregoing, it is our opinion that, as of August 3,
2000, the consideration to be received by the shareholders of the Company       
pursuant to the Merger Agreement is fair, from a financial point of view, to the
holders of the Company's outstanding Common Stock.                              

Very truly yours,                                                               

/s/ Raymond James & Associates, Inc.                                            

RAYMOND JAMES & ASSOCIATES, INC.                                                

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                                                                         ANNEX C

(S) 623. Procedure to enforce shareholder's right to receive payment for shares.

  (a) A shareholder intending to enforce his right under a section of this
chapter to receive payment for his shares if the proposed corporate action      
referred to therein is taken shall file with the corporation, before the meeting
of shareholders at which the action is submitted to a vote, or at such meeting  
but before the vote, written objection to the action. The objection shall       
include a notice of his election to dissent, his name and residence address, the
number and classes of shares as to which he dissents and a demand for payment of
the fair value of his shares if the action is taken. Such objection is not      
required from any shareholder to whom the corporation did not give notice of    
such meeting in accordance with this chapter or where the proposed action is    
authorized by written consent of shareholders without a meeting.                

    (b) Within ten days after the shareholders' authorization date, which term
as used in this section means the date on which the shareholders' vote          
authorizing such action was taken, or the date on which such consent without a  
meeting was obtained from the requisite shareholders, the corporation shall give
written notice of such authorization or consent by registered mail to each      
shareholder who filed written objection or from whom written objection was not  
required, excepting any shareholder who voted for or consented in writing to the
proposed action and who thereby is deemed to have elected not to enforce his    
right to receive payment for his shares.                                        

   (c) Within twenty days after the giving of notice to him, any shareholder
from whom written objection was not required and who elects to dissent shall    
file with the corporation a written notice of such election, stating his name   
and residence address, the number and classes of shares as to which he dissents 
and a demand for payment of the fair value of his shares. Any shareholder who   
elects to dissent from a merger under section 905 (Merger of subsidiary         
corporation) or paragraph (c) of section 907 (Merger or consolidation of        
domestic and foreign corporations) or from a share exchange under paragraph (g) 
of section 913 (Share exchanges) shall file a written notice of such election to
dissent within twenty days after the giving to him of a copy of the plan of     
merger or exchange or an outline of the material features thereof under section 
905 or 913.                                                                     

    (d) A shareholder may not dissent as to less than all of the shares, as to
which he has a right to dissent, held by him of record, that he owns            
beneficially. A nominee or fiduciary may not dissent on behalf of any beneficial
owner as to less than all of the shares of such owner, as to which such nominee 
or fiduciary has a right to dissent, held of record by such nominee or          
fiduciary.                                                                      

(e) Upon consummation of the corporation action, the shareholder shall
cease to have any of the rights of a shareholder except the right to be paid the
fair value of his shares and any other rights under this section. A notice of   
election may be withdrawn by the shareholder at any time prior to his acceptance
in writing of an offer made by the corporation, as provided in paragraph (g),   
but in no case later than sixty days from the date of consummation of the       
corporate action except that if the corporation fails to make a timely offer, as
provided in paragraph (g), the time for withdrawing a notice of election shall  
be extended until sixty days from the date an offer is made. Upon expiration of 
such time, withdrawal of a notice of election shall require the written consent 
of the corporation. In order to be effective, withdrawal of a notice of election
must be accompanied by the return to the corporation of any advance payment made
to the shareholder as provided in paragraph (g). If a                           

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notice of election is withdrawn, or the corporate action is rescinded, or a     
court shall determine that the shareholder is not entitled to receive payment   
for his shares, or the shareholder shall otherwise lose his dissenters' rights, 
he shall not have the right to receive payment for his shares and he shall be   
reinstated to all his rights as a shareholder as of the consummation of the     
corporate action, including any intervening preemptive rights and the right to  
payment of any intervening dividend or other distribution or, if any such rights
have expired or any such dividend or distribution other than in cash has been   
completed, in lieu thereof, at the election of the corporation, the fair value  
thereof in cash as determined by the board as of the time of such expiration or 
completion, but without prejudice otherwise to any corporate proceedings that   
may have been taken in the interim.                                             

   (f) At the time of filing the notice of election to dissent or within one
month thereafter the shareholder of shares represented by certificates shall    
submit the certificates representing his shares to the corporation, or to its   
transfer agent, which shall forthwith note conspicuously thereon that a notice  
of election has been filed and shall return the certificates to the shareholder 
or other person who submitted them on his behalf. Any shareholder of shares     
represented by certificates who fails to submit his certificates for such       
notation as herein specified shall, at the option of the corporation exercised  
by written notice to him within forty-five days from the date of filing of such 
notice of election to dissent, lose his dissenter's rights unless a court, for  
good cause shown, shall otherwise direct. Upon transfer of a certificate bearing
such notation, each new certificate issued therefor shall bear a similar        
notation together with the name of the original dissenting holder of the shares 
and a transferee shall acquire no rights in the corporation except those which  
the original dissenting shareholder had at the time of transfer.                

 (g) Within fifteen days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within fifteen   
days after the proposed corporate action is consummated, whichever is later (but
in no case later than ninety days from the shareholders' authorization date),   
the corporation or, in the case of a merger or consolidation, the surviving or  
new corporation, shall make a written offer by registered mail to each          
shareholder who has filed such notice of election to pay for his shares at a    
specified price which the corporation considers to be their fair value. Such    
offer shall be accompanied by a statement setting forth the aggregate number of 
shares with respect to which notices of election to dissent have been received  
and the aggregate number of holders of such shares. If the corporate action has 
been consummated, such offer shall also be accompanied by (1) advance payment to
each such shareholder who has submitted the certificates representing his shares
to the corporation, as provided in paragraph (f), of an amount equal to eighty  
percent of the amount of such offer, or (2) as to each shareholder who has not  
yet submitted his certificates a statement that advance payment to him of an    
amount equal to eighty percent of the amount of such offer will he made by the  
corporation promptly upon submission of his certificates. If the corporate      
action has not been consummated at the time of the making of the offer, such    
advance payment or statement as to advance payment shall be sent to each        
shareholder entitled thereto forthwith upon consummation of the corporation     
action. Every advance payment or statement as to advance payment shall include  
advice to the shareholder to the effect that acceptance of such payment does not
constitute a waiver of any dissenters' rights. If the corporate action has not  
been consummated upon the expiration of the ninety day period after the         
shareholders'                                                                   

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authorization date, the offer may be conditioned upon the consummation of such  
action. Such offer shall be made at the same price per share to all dissenting  
shareholders of the same class, or if divided into series, of the same series   
and shall be accompanied by a balance sheet of the corporation whose shares the 
dissenting shareholder holds as of the latest available date, which shall not be
earlier than twelve months before the making of such offer, and a profit and    
loss statement or statements for not less than a twelve month period ended on   
the date of such balance sheet or, if the corporation was not in existence      
throughout such twelve month period, for the portion thereof during which it was
in existence. Notwithstanding the foregoing, the corporation shall not be       
required to furnish a balance sheet or profit and loss statement or statement or
statements to any shareholder to whom such balance sheet or profit and loss     
statement or statements were previously furnished, nor if in connection with    
obtaining the shareholders' authorization for or consent to the proposed        
corporate action the shareholders were furnished with a proxy or information    
statement, which included financial statements, pursuant to Regulation 14A or   
Regulation 14C of the United States Securities and Exchange Commission. If      
within thirty days after the making of such offer, the corporation making the   
offer and any shareholder agree upon the price to be paid for his shares,       
payment thereof shall be made within sixty days after the making of such offer  
or the consummation of the proposed corporate action, whichever is later, upon  
the surrender of the certificates for any such shares represented by            
certificates.                                                                   

  (h) The following procedure shall apply if the corporation fails to make
such offer within such period of fifteen days, or if it makes the offer and any 
dissenting shareholder or shareholders fail to agree with it within the period  
of thirty days thereafter upon the price to be paid for their shares:           

         (1) The corporation shall, within twenty days after the expiration of
whichever is applicable of the two periods last mentioned, institute a special  
proceeding in the supreme court in the judicial district in which the office of 
the corporation is located to determine the rights of dissenting shareholders   
and to fix the fair value of their shares. If, on the case of merger of         
consolidation, the surviving or new corporation is a foreign corporation without
an office in this state, such proceeding shall be brought in the county where   
the office of the domestic corporation, whose shares are to be valued, was      
located.                                                                        

         (2) If the corporation fails to institute such proceeding within such
period of twenty days, any dissenting shareholder may institute such proceeding 
for the same purpose not later than thirty days after the expiration of such    
twenty day period. If such proceeding is not instituted within such thirty-day  
period, all dissenter's rights shall be lost unless the supreme court, for good 
cause shown, shall otherwise direct.                                            

        (3) All dissenting shareholders, excepting those who, as provided in
paragraph (g), have agreed with the corporation upon the price to be paid for   
their shares, shall be made parties to such proceeding, which shall have the    
effect of an action quasi in rem against their shares. The corporation shall    
serve a copy of the petition in such proceeding upon each dissenting shareholder
who is a resident of this state in the manner provided by law for the service of
a                                                                               

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summons, and upon each nonresident dissenting shareholder either by registered  
mail and publication, or in such other manner as is permitted by law. The       
jurisdiction of the court shall be plenary and exclusive.                       

         (4) The court shall determine whether each dissenting shareholder, as
to whom the corporation requests the court to make such determination, is       
entitled to receive payment for his shares. If the corporation does not request 
any such determination or if the court finds that any dissenting shareholder is 
so entitled, it shall proceed to fix the value of the shares, which, for the    
purposes of this section, shall be the fair value as of the close of business on
the day prior to the shareholders' authorization date. In fixing the fair value 
of the shares, the court shall consider the nature of the transaction giving    
rise to the shareholder's right to receive payment for shares and its effects on
the corporation and its shareholders, the concepts and methods then customary in
the relevant securities and financial markets for determining fair value of     
shares of a corporation engaging in a similar transaction under comparable      
circumstances and all other relevant factors. The court shall determine the fair
value of the shares without a jury and without referral to an appraiser or      
referee. Upon application by the corporation or by any shareholder who is a     
party to the proceeding, the court may, in its discretion, permit pretrial      
disclosure, including, but not limited to, disclosure of any expert's reports   
relating to the fair value of the shares whether or not intended for use at the 
trial in the proceeding and notwithstanding subdivision (d) of section 3101 of  
the civil practice law and rules.                                               

      (5) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting shareholder who is a party to the       
proceeding and is entitled thereto for the value of his shares so determined.   

       (6) The final order shall include an allowance for interest at such
rate as the court finds to be equitable, from the date the corporate action was 
consummated to the date of payment. In determining the rate of interest, the    
court shall consider all relevant factors, including the rate of interest which 
the corporation would have had to pay to borrow money during the pendency of the
proceeding. If the court finds that the refusal of any shareholder to accept the
corporate offer of payment for his shares was arbitrary, vexatious or otherwise 
not in good faith, no interest shall be allowed to him.                         

  (7) Each party to such proceeding shall bear its own costs and
expenses, including the fees and expenses of its counsel and of any experts     
employed by it. Notwithstanding the foregoing, the court may, in its discretion,
apportion and assess all or any part of the costs, expenses and fees incurred by
the corporation against any or all of the dissenting shareholders who are       
parties to the proceeding, including any who have withdrawn their notices of    
election as provided in paragraph (e), if the court finds that their refusal to 
accept the corporate offer was arbitrary, vexatious or otherwise not in good    
faith. The court may, in its discretion, apportion and assess all or any part of
the costs, expenses and fees incurred by any or all of the dissenting           
shareholders who are parties to the proceeding against the corporation if the   
court finds any of the following: (A) that the fair value of the shares as      
determined materially exceeds the amount which the corporation offered to pay;  
(B) that no offer or required advance payment was made by the corporation; (C)  
that                                                                            

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the corporation failed to institute the special proceeding within the period    
specified therefor; or (D) that the action of the corporation in complying with 
its obligations as provided in this section was arbitrary, vexatious or         
otherwise not in good faith. In making any determination as provided in clause  
(A), the court may consider the dollar amount or the percentage, or both, by    
which the fair value of the shares as determined exceeds the corporate offer.   

          (8) Within sixty days after final determination of the proceeding, the
corporation shall pay to each dissenting shareholder the amount found to be due 
him, upon surrender of the certificates for any such shares represented by      
certificates.                                                                   

     (i) Shares acquired by the corporation upon the payment of the agreed value
therefor or of the amount due under the final order, as provided in this        
section, shall become treasury shares or be canceled as provided in section 515 
(Reacquired shares), except that, in the case of a merger or consolidation, they
may be held and disposed of as the plan of merger or consolidation may otherwise
provide.                                                                        

     (j) No payment shall be made to a dissenting shareholder under this section
at a time when the corporation is insolvent or when such payment would make it  
insolvent. In such event, the dissenting shareholder shall, at his option:      

     (1) Withdraw his notice of election, which shall in such event be
deemed withdrawn with the written consent of the corporation; or                

          (2) Retain his status as a claimant against the corporation and, if it
is liquidated, be subordinated to the rights of creditors of the corporation,   
but have rights superior to the non-dissenting shareholders, and if it is not   
liquidated, retain his right to be paid for his shares, which right the         
corporation shall be obliged to satisfy when the restrictions of this paragraph 
do not apply.                                                                   

   (3) The dissenting shareholder shall exercise such option under
subparagraph (1) or (2) by written notice filed with the corporation within     
thirty days after the corporation has given him written notice that payment for 
his shares cannot be made because of the restrictions of this paragraph. If the 
dissenting shareholder fails to exercise such option as provided, the           
corporation shall exercise the option by written notice given to him within     
twenty days after the expiration of such period of thirty days.                 

  (k) The enforcement by a shareholder of his right to receive payment for
his shares in the manner provided herein shall exclude the enforcement by such  
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in paragraph (e), and except that this   
section shall not exclude the right of such shareholder to bring or maintain an 
appropriate action to obtain relief on the ground that such corporate action    
will be or is unlawful or fraudulent as to him.                                 

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   (l) Except as otherwise expressly provided in this section, any notice to
be given by a corporation to a shareholder under this section shall be given in 
the manner provided in section 605 (Notice of meetings of shareholders).        

     (m) This section shall not apply to foreign corporations except as provided
in subparagraph (e)(2) of section 907 (Merger or consolidation of domestic and  
foreign corporations).                                                          

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                                                                         ANNEX D

natural [LOGO]
wonders(R)
naturalwonders.com

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growing the business                                                            
natural wonders                                                                 
annual report 1999                                                              

history                                                                         
Founded in 1987, Natural Wonders is a national specialty retailer with 182      
stores, offering unique and quality merchandise focused on the wonders of       
nature, science, the environment, and education. Stores feature a multi-sensory 
experience coupled with superb customer service that makes the shopping         
experience fun and rewarding. With corporate headquarters located in Fremont,   
California, the stock trades on the NASDAQ National Market System under the     
symbol NATW. Visit our website at www.naturalwonders.com                        

growing the business                                                            
We are evolving; we are changing; we are growing. Growing the business is       
complex. It is more than adding stores, it is adding profitable stores. It is   
more than increasing sales, it is maintaining a healthy profit component for    
these sales. We are mindful of the importance of evolving to a better state of  
growth, one that rewards the shareholders for patience with their Natural       
Wonders investment.                                                             
To evolve, we have created a more effective retailing organization both in      
merchandising and store operations. The year ended with a positive response from
customers that confirmed we are recapturing the wonder in the marketplace. We   
will now build upon the momentum of last year's program.                        

Evolution                                                                       
"Evolution aptly describes the process that we have begun. Natural Wonders has  
taken dramatic and decisive action in an effort to regain our credibility with  
our customers and shareholders." Peter Hanelt, Chief Executive Officer & Chief  
Financial Officer to our shareholders We continue along the path of recapturing 
the wonder that began last year. While not a success by profitability           
expectations, the year was a major step forward in the evolution of the new     
Natural Wonders. To be profitable, we must meet two significant challenges.     
First, the seven-year comparable store sales decline must be reversed. Second,  
we must eliminate the unprofitable stores within our portfolio. Many of these   
leases were negotiated in the 1995 to 1997 period. Declining sales and          
unprofitable stores combined to create the unacceptable losses of the last two  
years. Solving these two issues is the key to restoring profitability and       
shareholder value.                                                              
While the progress toward improving sales has been slow, there have been        
encouraging signs. Since September 1999 we have had a cumulative positive       
comparable store sales increase and in February 2000 completed the first        
consecutive three month period with positive monthly comparable store sales     
increases since 1992.                                                           
We completed the analysis of our unprofitable stores. A $4.1 million charge to  
expense for the closure of unprofitable stores and related asset impairments was
recognized in 1999. This accounted for over 30% of our reported fiscal year     
loss. Some additional costs associated with closing specific stores will be     
incurred in fiscal 2000, however, we expect these costs to be fully offset by   
occupancy cost reductions. We expect to close most of our unprofitable stores by
the end of 2000.                                                                

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To be prudent, we continue the two year trend of decreasing total company       
expenses as measured on a per store operating month basis. We are not only      
offsetting all inflationary expense increases but are decreasing expenses on an 
absolute basis. This creates the opportunity for ever increasing positive       
operating leverage as the improving sales trend continues.                      

evolution                                                                       
Last year's theme was recapturing the wonder. This year our theme is evolution. 
Evolution aptly describes the process that we have begun. Natural Wonders has   
taken dramatic and decisive action to regain our credibility with our customers 
and shareholders. We expanded our successful holiday store program, closed      
several unprofitable stores, decreased corporate overhead, and increased our    
merchandise availability, selection and value. We rebuilt vendor relationships, 
established key vendor partnerships in important categories, began the expansion
of proprietary product development and negotiated new product sourcing          
arrangements. We also reorganized the field store management organization to    
increase accountability. Natural Wonders will continue these efforts,           
particularly increasing merchandising newness and continued closing of          
unprofitable stores, until we achieve our substantial profitability potential.  

not just evolution but successful evolution                                     
More importantly, the evolution continues into the new fiscal year. The first   
month of the 2000 fiscal year delivered a positive comparable store result of   
5.1% and a healthy gross profit. The outlook for substantial improvement from   
last year's financial results is very positive for the new fiscal year.         
We believe we are successfully addressing key infrastructure issues in support  
of our merchandising and sales efforts. We have a reasonable amount of excess   
capacity in information systems and distribution facilities. The corporate      
support staff is adequate to support the store base. We had no difficulties with
the Y2K transition.                                                             

Natural Wonders embraces the benefits of information technology and continues to
improve our systems and their utilization. Our new systems, installed in 1998,  
are fully integrated into our internal operations. We successfully launched our 
Internet site last year. Our Internet sales continue to grow and we have        
effective fulfillment and back office operations. The Internet is an opportunity
for us to leverage our brand, sell our products and enhance our corporate       
visibility. We fully expect the Internet to become a more important             
brand-building and sales vehicle going forward.                                 

where have all the flowers gone                                                 
The last couple of years witnessed the demise or sale of several independent    
competitors in our mall-based specialty retail niche. Learningsmith was         
liquidated, Imaginarium and the Nature Company were sold, World of Science and  
other specialty gift retailers are being offered for sale. The liquidation of   
Learningsmith during December of 1999 created extreme promotional activity and  
adversely affected our sales and margins. Nevertheless, the longer-term impact  
of a reduced number of competitors is positive for us. We intend, and have the  
resources, determination and energy, to be the leading survivor within the      
category. The departure of numerous competitors creates an opportunity for us.  

birds of a feather flock together                                               
We continue to be inspired to deliver a concept known by its unique merchandise 
and inspired by the wonders of nature and science. As part of                   

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our program to recapture the wonder in our stores, we strive to support         
important natural themes. We are pleased that we are able to assist, through    
innovative concepts and creative partnerships, such organizations as the Gorilla
Foundation and the National Audubon Society. We are proud of our support of     
these worthwhile organizations.                                                 

survival of the fittest                                                         
Not all of our stores are successful. We have a group of stores that are        
incurring losses at the contribution margin level and the response in these     
stores to our new merchandising strategies adopted in 1999 was not sufficient to
overcome the high occupancy costs in these locations. Most of these stores were 
opened between 1995 to 1997. These stores represent a substantial drain on      
corporate profitability and assets. During the fourth quarter of 1999, we       
recorded a charge of $3.2 million to recognize the asset impairment associated  
with specific stores targeted for closure. We closed nine stores during 1999 and
will close the remainder of the underperforming stores as soon as possible. We  
have been able to restructure other leases and have received significant        
occupancy cost reductions as a result. I emphasize that these stores represent a
relatively small portion of our real estate base but account for a large part of
our operating loss. I am encouraged by the progress to date and the prospects   
for further success.                                                            

At the same time, we are expanding our store base with carefully selected       
openings and are actively working with the developer community to increase our  
presence in attractive malls. We have negotiated leases for stores to open in   
the new fiscal year and are in active and productive discussions to open several
other stores this year.                                                         

our holiday stores evolve to regular stores                                     
During the 1998 holiday season, we doubled our temporary holiday store program  
and substantially increased our per store contribution margin. In 1999, we again
expanded the program with further contribution margin improvement. The stores   
are different from regular stores in terms of fixtures, physical size, number of
items offered and types of malls targeted for the stores. Because of our high   
holiday sales, these temporary stores can be very profitable even if            
operationally complex. Based upon their actual results, we believe that we can  
project with confidence their potential to become successful permanent stores.  
In fact, in 1998 we converted three temporary stores to permanent stores and    
subsequently attained projected sales. From the 1999 program, we are converting 
three other temporary stores to permanent stores and will possibly convert      
additional stores after further analysis and negotiations.                      
Because our holiday stores are appreciated by mall shoppers, offer unique       
merchandise, are visually attractive and might become regular stores, both the  
developers and we believe that this program offers mutual benefits. We are in   
active discussions for the year 2000 program and are confident that once again  
we can deliver improved per store profitability results.                        

all in the family, genus: natural wonders                                       
The process of evolution involves each of the company's executives. They are the
ones with the experience and expertise to create improvement. Within this annual
report, certain executives will add their observations, comments, and           
commitments to our message of growth, evolution and success. We promise to give 
our best each day in order to achieve Natural Wonders' substantial profitability
potential and to improve shareholder value.                                     

Peter G. Hanelt                                                                 
Chief Executive Officer &                                                       

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Chief Financial Officer                                                         

Rejuvenation                                                                    
"We will capture our customer through compelling products, bold marketing and   
engaging visual presentation. Each of these elements will consistently          
contribute to the Natural Wonders persona." Michael Cape, Vice President,       
Marketing & Visual                                                              

Natural Wonders nurtures the relationship between people and the earth. It is   
our business to sell merchandise that generates excitement about the world of   
nature and science. This is our mission. Our goal for 2000 is to rejuvenate the 
Natural Wonders concept and showcase it to the customer. The following are key  
initiatives to support this goal.                                               

theme presentations                                                             
This strategy highlights a related group of products that tell a story about a  
specific place or activity inspired by the wonders of nature, science, education
and the environment. In 2000 we will support three theme presentations in the   
store at all times. We have established our theme calendar and determined our   
merchandising statements based on trends and seasonal merchandise. The merchant 
team has taken these concepts overseas and to domestic markets and developed    
their assortment of new and exclusive products based on these themes. We look   
forward to presenting themes such as the "Rainforest", the "Naturalist" and many
more. These presentations support a highly interactive and educational          
experience in our stores.                                                       

marketing partnerships                                                          
We are developing partnerships with non-profit organizations that support the   
environment and conservation. These relationships are consistent with our       
merchandising and brand character. Examples include The Gorilla Foundation and  
our partnership with the National Audubon Society (N.A.S) in support of the     
"Naturalist" theme presentation. The N.A.S mission is to conserve and restore   
natural ecosystems, focusing on birds and other wildlife for the benefit of     
humanity and the earth's biological diversity. Elements of this partnership     
include: in-store Audubon membership drives, fund raising, joint press releases,
a customer sweepstakes for an ecotour, web site links, a feature in the Audubon 
magazine, newsletters and more. We will heighten awareness for both Natural     
Wonders and the National Audubon Society through shared marketing vehicles.     

engaging the customer                                                           
Our storefront offers a marketing opportunity as each potential customer        
approaches. We will leverage our window and first fixture presentation with     
themed and seasonal products, dynamic graphics and visual displays. These will  
rotate regularly to stay fresh and unique, thus capturing the attention of      
shoppers. We are enhancing our dialog with the Natural Wonders' customer through
a direct mail newsletter called "Words of Wonder". This newsletter will         
highlight new products, promotions, theme presentations, non-profit             
partnerships, gift ideas, customer letters and important information about      
conservation. Our newsletter will strengthen our relationship with our customer,
build awareness and reinforce the Natural Wonders brand. We are partnering with 
our vendors and mall-marketing resources in a cooperative advertising strategy  
for print advertising, direct mail and in-store events that will reach out to   
existing and new customers.                                                     

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Our web site will continue to support the "click and mortar" strategy of driving
traffic to our stores by highlighting events, promotions, store directory and   
company information, as well as offer a product assortment for purchase online. 
At Natural Wonders we have a great story to tell and we look forward to         
communicating it to our customers.                                              

Unique                                                                          
"Our mission is to offer a unique assortment and an interactive store           
environment that differentiates Natural Wonders from the competition." Ken      
Norton, Executive Vice President, General Merchandise Manager                   

uniqueness                                                                      
Our uniqueness is derived through the merchandise assortment and how it is      
gathered together through visuals and our theme presentations. Using nature as  
an overall store concept creates a unique product offering. Nature is           
represented in the use of materials, texture and patterns. An ever-present      
quality and value available in all our products also add to our uniqueness.     
Our uniqueness is accentuated by the many different types of products we offer, 
which include: Ecospheres(R), minerals and fossils, science kits, astronomy,    
home decor, relaxation, garden accents, fountains, books, music and videos.     

growing categories                                                              
Garden is an area that enjoyed wonderful growth in 1999. It is also an area in  
which we have a unique range of products. Our garden statement includes: chimes,
seed kits, cachepots, bird houses and feeders, garden statuary, weather         
instruments, and of course, fountains. Fountains are desired for their tranquil 
aesthetic qualities. Natural Wonders has become the destination for indoor      
fountains. We offer an assortment that includes a range of materials and prices.
Many of our fountains are proudly made by craftsman in the United States; others
are produced overseas for value pricing. We will be updating our assortment of  
fountains throughout the year in order to keep it fresh and interesting to the  
customer.                                                                       
As the interest in Feng Shui has grown and become a part of everyday America, so
the interest in relaxation and aromatherapy has grown. We see relaxation        
products and aromatherapy transition from the New Age concept to everyday life. 
Massagers, comfort pillows, incense and diffusers are increasing in popularity. 
Aromatherapy is transitioning into home fragrance designed to enhance the home  
and stimulate the senses. Both fountains and relaxation support the home as a   
daily "retreat" from fast paced everyday life.                                  

Geology is another area in which we are unique. This uniqueness has garnered a  
growth category in minerals and fossils. Collectors as well as the customer who 
finds a particular mineral bookend or sculpture to their liking, come to Natural
Wonders to find just what they are looking for.                                 

reach for the stars                                                             
Natural Wonders will continue to be a destination for telescopes and telescope  
accessories. We will optimize this strategy by increasing our product offering  
and supporting new marketing and in-store presentations.                        

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Germination                                                                     
"Our product offering will be true to our mission of offering merchandise that  
focuses on the wonders of nature, science, the environment and education."      
Denise Ellwood, Vice President, Merchandising                                   

vision                                                                          
Our vision for merchandising our stores is one of synergy throughout the store. 
This is attained through visual presentation as well as the product assortment  
itself. Rough ideas for the vision are outlined through blueprint and concept   
boards developed well in advance of any travel, trade shows or product design.  
For 2000, the vision entails the use of a variety of themes throughout the year,
a color palette that is seen in product across categories, visual presentation  
and packaging. All these elements result in a germination of ideas that lead to 
unique, impactful products.                                                     

product development                                                             
Natural Wonders' development teams work a year in advance to create product that
is uniquely our own. We begin with a blueprint that outlines the items,         
materials, colors, themes and price points that fit into our merchandising      
vision for the year. From the blueprint, we create concept boards for the       
various themes and color palettes. The blueprint and concept boards are then    
sent overseas to our agents. The development teams travel around the world in   
order to meet with vendors, attend trade shows and work with our agents to      
source the best factories in which to realize our concepts. This is a new       
process for Natural Wonders that will come to fruition with proprietary product 
during the Fall of 2000 and into 2001. Ideas for product development come from  
many sources. Current trends in the home, the garden, relaxation, environment   
and education are all taken into consideration. We also interpret trends for    
home decor into merchandise that reflects our interest in nature through use of 
materials and patterns. Product development is most successful when it offers   
unique product that the customer perceives as a value due to the quality        
inherent in the design and through the use of materials.                        

assortment                                                                      
Merchandise teams travel overseas twice a year as well as throughout the United 
States several times a year to attend trade shows and markets in order to find  
unique product crafted by talented artisans. All product must fit certain       
criteria in order to become part of the Natural Wonders' assortment. We search  
for product that fits into a nature or science view as well as meeting certain  
quality requirements that would present a value to our customer.                
Samples are gathered from around the world to create a merchandise statement. We
sort through the samples gathered and decide upon which items will best show our
vision. We look at what materials, colors and patterns are used throughout the  
categories. Synergy is created as we tell a common story through the merchandise
offered in relaxation, garden and home decor gifts.                             

Structure                                                                       
"One of Natural Wonders' competitive advantages has always been the high level  
of customer service and product knowledge in the stores." William Soncini,      
Senior Vice President, Operations                                               

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The primary goals of the field organization are to generate sales increases and 
deliver exceptional customer service. Meeting these goals hinges on the         
structure of the field group, our commitment to our employees and our ability to
communicate effectively.                                                        

structure                                                                       
While 1999 proved to be one of the most challenging years for Natural Wonders,  
it has produced significant and exciting changes in the operational group. Faced
with disappointing sales results, we began to reassess the entire structure of  
the field organization. We reviewed what worked, opportunities for improvement  
and how to maximize the dedication and experience of the employees in the field.

We realized that one key to revitalizing our stores' performance was to reduce  
the number of stores reporting to each direct supervisor. By reducing the span  
of control, especially at the regional level, we could enhance development and  
improve execution. To achieve this goal, a third regional position was created. 
Each regional is now responsible for approximately 60 stores resulting in closer
supervision, greater accountability and quicker resolution of problems. Regional
Managers now have a small group of stores reporting directly to them which      
allows them to quickly assess the impact of corporate direction on store        
operations and sales, as well as provide feedback to corporate to improve       
processes. These structural changes have already resulted in significant sales  
improvements in the last few months.                                            

employees                                                                       
Retailing is often known as employment's revolving door. Keeping good employees 
is a challenge that must be balanced with the competitive pressures of the      
marketplace. At Natural Wonders we know that employees are the backbone of the  
company. To support these critical players we have instituted several training  
programs, a new bonus program and an extremely competitive benefit package.     
We've created opportunities for ownership and continue to reward performance. As
a result, our employees are committed to Natural Wonders. They bring a rare     
excitement to their work and we will ensure this energy results in sales        
increases. One of Natural Wonders' competitive advantages has always been the   
high level of customer service and product knowledge in the stores. Customer    
feedback continues to show that we have maintained that level with consistency. 
In 2000, we will continue to emphasize these factors that have made the Natural 
Wonders concept viable--creating an interactive shopping environment with       
helpful and knowledgeable employees.                                            

expectations                                                                    
We have dedicated ourselves to quickly recognize individual store issues and    
correct them. Our expectation is that service and presentation will remain at an
all time high, that sales increases will continue and that the quality and      
caliber of all Natural Wonders associates will be a source of pride. By focusing
on these key factors, we, out in the stores, are attending to every detail of   
our business with confidence and determination.                                 

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 Selected Financial Data

                                                        [Enlarge/Download Table]

                                                                                          Fiscal Year                           
                                                                 1999           1998         1997          1996          1995   
--------------------------------------------------------------------------------------------------------------------------------
(In thousands, except operating data and per share amounts)                                                                     

Summary of Operations Data:                                                                                                     
                                                                                                                                
Net sales                                                     $ 147,089     $ 149,821     $ 149,239     $ 138,773     $ 138,080 
Cost of goods sold and store                                                                                                    
    occupancy expenses                                          108,483       106,162       100,998        92,489        93,529 
                                                              ---------     ---------     ---------     ---------     --------- 
Gross margin                                                     38,606        43,659        48,241        46,284        44,551 
Selling, general and administrative                                                                                             
    expenses                                                     52,001        46,211        45,794        40,894        40,640 
                                                              ---------     ---------     ---------     ---------     --------- 
Operating income (loss)                                         (13,395)       (2,552)        2,447         5,390         3,911 
Net interest and other expenses                                     452           465           276           791           944 
                                                              ---------     ---------     ---------     ---------     --------- 
Earnings (loss) before income taxes                             (13,847)       (3,017)        2,171         4,599         2,967 
Income tax provision (benefit)                                   (5,359)       (1,120)          803         1,698         1,157 
                                                              ---------     ---------     ---------     ---------     --------- 
Net earnings (loss)                                           $  (8,488)    $  (1,897)    $   1,368     $   2,901     $   1,810 
                                                              =========     =========     =========     =========     ========= 
Basic earnings (loss) per share                               $   (1.07)    $   (0.24)    $    0.17     $    0.37     $    0.23 
                                                              =========     =========     =========     =========     ========= 
Diluted earnings (loss) per share                             $   (1.07)    $   (0.24)    $    0.17     $    0.36     $    0.23 
                                                              =========     =========     =========     =========     ========= 
Shares used in computing basic                                                                                                  
    earnings (loss) per share                                     7,905         8,014         8,005         7,862         7,725 
Shares used in computing diluted                                                                                                
    earnings (loss) per share                                     7,905         8,014         8,200         8,090         7,819 

Operating Data:                                                                                                                 
Number of stores open at end of                                                                                                 
    year                                                            182           180           171           151           146 
Average net sales per gross square                                                                                              
    foot (52 weeks)                                           $     328     $     333     $     373     $     380     $     382 
Average net sales per store (52 weeks)                        $ 794,000     $ 831,000     $ 917,000     $ 932,000     $ 936,000 
Comparable store net sales decrease                              (4.2)%        (6.8)%        (1.4)%        (0.6)%        (5.7)% 

Balance Sheet Data at Fiscal Year End:                                                                                          
Working capital                                               $  18,565     $  26,812     $  29,681     $  33,495     $  31,252 
Total assets                                                     65,341        70,848        79,337        78,344        77,964 
Long-term borrowings                                               --            --           1,144         3,377         6,972 
Stockholders' equity                                             44,640        53,450        55,802        54,156        50,658 

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Management's Discussion and Analysis
of Financial Condition and Results of Operations

                                                        [Enlarge/Download Table]

                                                              Fiscal Year            
                                                 ------------------------------------

(Percentage of net sales)                         1999           1998           1997 
                                                 ------------------------------------
                                                                                     
Net sales                                        100.0%         100.0%         100.0%
Cost of goods sold and store occupancy expenses   73.7           70.9           67.7 
Gross margin                                      26.3           29.1           32.3 
Selling, general and administrative expenses      35.4           30.8           30.7 
Operating income (loss)                          (9.1)          (1.7)            1.6 
Net interest and other expenses                    0.3            0.3            0.2 
Income tax provision (benefit)                   (3.6)          (0.7)            0.5 
Net earnings (loss)                              (5.8)%         (1.3)%           0.9%

Number of stores open at end of period            182            180             171 


Results of Operations                                                           

General                                                                         

         The Company's fiscal year ends on the Saturday closest to January
31. Fiscal years 1999, 1998 and 1997 ended January 29, 2000, January 30, 1999,  
and January 31, 1998, respectively. All references to years, unless otherwise   
specified, are intended to refer to the Company's fiscal year.                  

        At the end of 1999, the Company operated 182 stores in 39 states
compared to 180 stores in 36 states at the end of 1998 and 171 stores in 36     
states at the end of 1997. In 1999, 10 new stores were opened, 9 permanent and 3
temporary stores were closed, and 4 temporary stores were still open on January 
29, 2000. In 1998, 9 new stores were opened, 3 stores were closed, and 3        
temporary stores were still open on January 30, 1999. In 1997, 9 new stores were
opened and 2 closed. On May 22, 1997, the Company acquired 12 locations through 
the acquisition of substantially all of the operating assets of What A World!,  
Inc. In addition, in 1999, 26 stores with temporary locations were opened during
the holiday season compared to 27 stores in 1998 and 12 stores in 1997. At the  
end of 1999, 4 temporary stores remained open and 3 will be converted to        
permanent stores during 2000. At the end of 1998, 3 temporary stores remained   
open and 2 were converted to permanent stores during 1999. At the end of 1997, 1
temporary store remained open and was converted to a permanent store during     
1998.                                                                           

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Sales                                                                           

         Sales decreased 1.8% to $147,089,000 in 1999 from $149,821,000 in
1998. The decrease of $2,732,000 was due primarily to a decrease in comparable  
store sales partially offset by new stores, stores in temporary locations and   
Internet sales. The 10 new stores accounted for $4,907,000 of sales increase and
the full year of sales from new stores opened in 1998, accounted for $1,067,000 
of sales increase. This was fully offset by the decrease in comparable store    
sales of $5,896,000 and the lost sales impact of 9 closed stores and 6 remodeled
stores of $2,907,000.                                                           

         The Company defines comparable store sales as the change in sales
for stores that have been open for twelve full consecutive months. Comparable   
store sales in 1999 decreased 4.2% as compared to 1998. The decrease was        
primarily attributable to the impact of repositioning the merchandise assortment
over the first three quarters of the year, as well as delays in implementing the
changes. Although overall comparable store sales decreased, some of the         
Company's stores experienced positive comparable store sales. The average dollar
amount per customer transaction increased significantly in 1999, from $22 to $25
(or 13.6%).                                                                     

         Sales increased 0.4% to $149,821,000 in 1998 from $149,239,000 in
1997. The increase of $582,000 was due primarily to new stores and stores in    
temporary locations, mostly offset by a decrease in comparable store sales. The 
9 new stores accounted for $4,208,000 of the increase, the stores in temporary  
locations accounted for $3,819,000 of the increase, and the full year of sales  
from new stores opened in 1997 accounted for $4,814,000 of the increase. This   
was mostly offset by the decrease in stores opened prior to 1997, which         
accounted for a $11,604,000 decrease and closed stores for a $654,000 decrease. 

          Comparable store sales in 1998 decreased 6.8% as compared to 1997.
The decrease was due primarily to a decrease in demand in the Discovery, Media  
and Geology product categories. The largest decreases occurred primarily in the 
Ohio, Mid-Atlantic and South Central districts. Although overall comparable     
store sales decreased, some of the Company's stores experienced positive        
comparable store sales. The average dollar amount per sales ticket increased    
slightly in 1998.                                                               

Cost of Goods Sold and Store Occupancy Expenses                                 

            Cost of goods sold and store occupancy expenses include distribution
center costs and other expenses associated with acquiring inventory. These costs
increased as a percentage of sales to 73.7% in 1999 from 70.9% in 1998 primarily
due to higher costs of goods for inventory, as well as higher occupancy and     
other fixed expenses on decreased per store sales levels.                       

          In 1998, cost of goods sold and store occupancy expenses increased
as a percentage of sales to 70.9% in 1998 from 67.7% in 1997. The increase was  
primarily due to the occupancy costs for a greater number of new and temporary  
stores open in 1998 than 1997 coupled with flat sales.                          

Selling, General and Administrative Expenses                                    

      Selling, general and administrative (SG&A) expenses, which are
primarily non-occupancy store expenses and corporate overhead, increased as a   
percentage of sales to 35.4% in 1999 from 30.8 % in 1998. The increase in       
expenses was due primarily to expenses and write-offs of $860,000 associated    
with closed stores as well as a charge of $3,240,000 representing the impairment
of certain long-lived store assets, primarily leasehold improvements.           

          In 1998, SG&A expenses increased slightly as a percentage of sales
to 30.8% compared to 30.7% in 1997. The increase was due the negotiated         
settlement of a patent infringement claim for $525,000. In addition, benefits of
cost controls were offset by the decline in comparable store sales and the      
expenses associated with the increase in the number of permanent and temporary  
stores.                                                                         

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Operating Income (Loss)                                                         

      As a result of the foregoing, there was an operating loss of $
13,395,000, or 9.1% of sales in 1999 and $2,552,000, or 1.7% of sales in 1998,  
compared to operating income of $2,447,000, or 1.6% of sales in 1997.           

Net Interest and Other Expenses                                                 

        Net interest and other expenses decreased to $452,000 or 0.3% of
sales in 1999 from $465,000 or 0.3% of sales in 1998, which was an increase from
$276,000 or 0.2% of sales in 1997. The increase in 1998 from 1997 was due       
primarily to less interest income due to a lower average investment balance.    

Income Tax Provision (Benefit)                                                  

      The effective tax rate was 38.7% in 1999 and 37.1% in 1998. No
valuation allowance was necessary to offset the deferred tax asset at the end of
1999, 1998 or 1997. Management evaluated the need for such an allowance and     
based on the Company's history of earnings and projected future profitability,  
determined that one was not necessary. Should actual future results differ from 
management estimates, the deferred tax assets, including the tax benefit        
recorded in 1999 and 1998, may not be realized.                                 

Net Earnings (Loss)                                                             

           As a result of the foregoing, there was a net loss of $8,488,000 or
5.8% of sales in 1999 and $1,897,000 or 1.3% of sales in 1998 compared to net   
income of $1,368,000 or 0.9% of sales in 1997.                                  

Liquidity and Capital Resources                                                 

     Seasonal working capital requirements have been met primarily
through short-term bank borrowings.                                             

       At fiscal year-end 1999 cash and investments were $3,010,000 in
comparison to $12,221,000 at year-end 1998. The decrease was primarily due to   
operating losses, stock repurchases, construction costs and fixtures for new    
stores, and the remodeling of existing stores, as well as increased inventory   
levels.                                                                         

            In fiscal 2000, the Company plans to open approximately 6 new stores
and, during the holiday season, approximately 25 temporary locations. The       
Company anticipates that cash in 2000 will primarily be used for capital        
expenditures and merchandise inventory for new stores and temporary locations,  
and to purchase inventory for the Company's existing stores, particularly prior 
to and during the peak holiday selling season. Additionally, in fiscal 1997 the 
Board of Directors of the Company authorized the repurchase of up to $2,000,000 
of Natural Wonders outstanding common stock. As of January 29, 2000, the Company
had repurchased 334,357 shares of Natural Wonders common stock for a total of   
$1,250,000.                                                                     

        The Company entered into an amended and restated credit facility
agreement with a commercial bank effective June 15, 1999 for the purpose of     
financing seasonal working capital needs. This line of credit is for a term of  
three years, with a maximum credit line of $30,000,000, and is provided by the  
same bank as the Company's previous credit facility agreement, together with an 
additional lender acting as administrative agent. The line provides for         
revolving advances up to the lesser of 60% of the value of eligible inventory,  
80% of the net retail liquidation value of eligible inventory, or the maximum   
credit line. As of January 29, 2000, total availability under the line was      
$12,284,000, with no amount outstanding. The line includes up to $5,000,000 for 
the issuance of commercial and standby letters of credit. The line of credit    
must be fully repaid for a 30-day consecutive period between January 1 and      
February 15 each year. The Company has the option of choosing interest payable  
at a rate based on LIBOR plus 2.25% or a rate equal to the bank's prime rate.   
The agreement contains restrictive covenants, which include maintaining certain 
minimum tangible net worth levels and requiring bank consent for the payment of 
dividends. As of January 29, 2000, the Company was not in compliance with the   
tangible net worth covenant. The noncompliance was waived and the agreement was 

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amended with a revised covenant. At the same time, the administrative agent     
assumed the commercial bank's participation. The agreement also includes certain
prepayment penalties.                                                           

         The Company has reviewed its plans to return the Company to
profitability, as well as progress on executing those plans, with its lender,   
when the line was amended at year-end. An important component of the plan       
addresses the profitability of individual stores. During the fourth quarter     
1999, the Company completed an in-depth analysis of its portfolio of store      
leases. A group of unprofitable store locations was identified for closure and  
the Company is now actively pursuing the termination or renegotiation of these  
lease agreements. A long-lived asset impairment reserve was established for most
of these locations and outside resources have been retained to support this     
effort. Charges will be incurred in 2000 in order to close some stores, but the 
amount of these charges is expected to be less than the operating cost savings  
from closing these stores. The Company will periodically reassess the success of
its real estate strategy as well as the rest of its management plan to return   
the Company to profitability.                                                   

         The Company believes that current cash and short-term investments
together with its cash flow from operations and funds available under its credit
facilities will be sufficient to fund the Company's operations for the next 12  
months.                                                                         

             The Company was not materially affected by the Year 2000 issue. The
Company did not have material expenditures related to the Year 2000 issue and as
such, costs associated with Year 2000 have not had a significant impact on the  
Company's results of operations, liquidity, or capital resources. The Company   
did not accelerate any system replacements or incur any costs for upgrades or   
additional personnel in order to make any systems Year 2000 compliant.          

         In January 1998, a lawsuit was filed against the Company alleging
that certain products sold by the Company infringed two patents of the plaintiff
and sought injunctive relief, unspecified damages, and enhanced damages and     
attorneys fees. In June 1998, the Company reached a negotiated settlement of    
this claim. The cost of the settlement, including legal expenses and reserves,  
was approximately $525,000 and was recorded in the first quarter ended May 2,   
1998.                                                                           

New Accounting Pronouncements                                                   

          SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", as delayed by SFAS No. 137, will be effective for the Company in   
fiscal 2001. SFAS No. 133 establishes accounting and reporting standards for    
derivative instruments embedded in other contracts, and hedging activities. It  
requires that an entity recognize all derivatives as either assets or           
liabilities in the statement of financial position and measure those instruments
at fair value. The Company does not expect adoption of this new standard to have
a significant impact on its financial statements.                               

Inflation and Seasonality                                                       

  The Company does not believe that its operations have been
materially affected by inflation during recent years. However, there is no      
assurance that its business will not be affected by inflation in the future.    

            The Company's business is subject to substantial seasonal variations
in demand. Historically, a significant portion of the Company's sales and       
substantially all of its net earnings have been realized during the fourth      
quarter (which includes the November/December holiday season), and levels of    
sales and net earnings have been significantly lower in the first three         
quarters, usually resulting in losses in these quarters. If for any reason the  
Company's sales were substantially below seasonal norms during the months of    
November and December, as was the case in 1998, the Company's annual results    
would be adversely affected. The Company's quarterly results of operations may  
fluctuate significantly as a result of comparable store sales levels, the timing
of new store openings and the amount of revenue contributed by new stores.      

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Future Results                                                                  

        This report contains forward-looking statements regarding, among
other matters, the Company's future strategy, store opening and closing plans,  
availability of financing and cash flows, merchandising strategy and growth. The
forward-looking statements are made pursuant to the safe harbor provisions of   
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
address matters which are subject to a number of risks and uncertainties. In    
addition to the general risks associated with the operation of specialty retail 
stores in a highly competitive environment, the success of the Company will     
depend on a variety of factors. The success of the Company's operations depends 
upon a number of factors relating to consumer spending, including economic      
conditions affecting disposable consumer income such as employment, business    
conditions, interest rates and taxation. The Company's continued growth also    
depends upon the demand for its products, which in turn is dependent upon       
various factors, such as the introduction and acceptance of new products and the
continued popularity of existing products, as well as the timely supply of all  
merchandise. Reference is made to the Company's filings with the Securities and 
Exchange Commission for further discussion of risks and uncertainties regarding 
the Company's business.                                                         

Market Risk                                                                     

            The Company does not undertake any specific actions to cover its
exposure to interest rate risk and the Company is not a party to any interest   
rate risk management transactions. The Company does not purchase or hold any    
derivative financial instruments.                                               

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 Natural Wonders, Inc.
Statements of Operations
 (In thousands, except
per share amounts)

                                                        [Enlarge/Download Table]

                                                              FISCAL YEAR            
                                                 ----------------------------------- 
                                                    1999         1998         1997   
                                                 ---------    ---------    --------- 
                                                                                     
Net sales                                        $ 147,089    $ 149,821    $ 149,239 
Cost of goods sold and store occupancy expenses    108,483      106,162      100,998 
                                                 ---------    ---------    --------- 
          Gross margin                              38,606       43,659       48,241 
Selling, general and administrative expenses        52,001       46,211       45,794 
                                                 ---------    ---------    --------- 
          Operating income (loss)                  (13,395)      (2,552)       2,447 

Interest expense                                       556          428          625 
Other expenses                                          59          484          450 
Interest and other income                             (163)        (447)        (799)
                                                 ---------    ---------    --------- 
          Earnings (loss) before income taxes      (13,847)      (3,017)       2,171 
Income tax provision (benefit)                      (5,359)      (1,120)         803 
                                                 ---------    ---------    --------- 
          Net earnings (loss)                    $  (8,488)   $  (1,897)   $   1,368 
                                                 =========    =========    ========= 

Net earnings (loss) per common share:                                                
          Basic                                  $   (1.07)   $   (0.24)   $    0.17 
          Diluted                                $   (1.07)   $   (0.24)   $    0.17 

Weighted average common shares outstanding:                                          
          Basic                                      7,905        8,014        8,005 
          Diluted                                    7,905        8,014        8,200 

See notes to financial statements.

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 Natural Wonders, Inc.
Balance Sheets
 (In thousands, except share data)

                                                        [Enlarge/Download Table]

                                                                                 January 29,  January 30,
                                                                                   2000         1999     
                                                                                 ----------------------- 
Assets                                                                                                   

Current Assets:                                                                                          
                                                                                                         
          Cash and cash equivalents                                              $  3,010    $  4,841    
          Short-term investments                                                     --         7,380    
          Merchandise inventories                                                  28,205      22,707    
          Prepaid income taxes                                                      1,386       1,403    
          Prepaid expenses and other current assets                                 3,083       3,262    
          Deferred taxes                                                              588       1,056    
                                                                                 --------    --------    
                    Total current assets                                           36,272      40,649    
Property and Equipment:                                                                                  
          Leasehold improvements                                                   22,759      30,077    
          Furniture, fixtures and equipment                                        21,175      34,106    
                                                                                 --------    --------    
                                                                                   43,934      64,183    
          Less accumulated depreciation and amortization                          (22,757)    (37,510)   
                                                                                 --------    --------    
                     Total property and equipment                                  21,177      26,673    
Deferred Taxes                                                                      7,707       3,085    
Other Assets                                                                          185         441    
                                                                                 --------    --------    
Total Assets                                                                     $ 65,341    $ 70,848    
                                                                                 ========    ========    

Liabilities and Stockholders' Equity                                                                     

Current Liabilities:                                                                                     
          Trade accounts payable                                                 $ 12,664    $  8,500    
          Accrued compensation and related costs                                    2,300       2,300    
          Accrued liabilities                                                       2,743       3,037    
                                                                                 --------    --------    
                    Total current liabilities                                      17,707      13,837    
Deferred Rent                                                                       2,994       3,561    
Commitments and Contingencies (Note 6)                                                                   
Stockholders' Equity:                                                                                    
          Preferred stock, par value $.0001; authorized 1,000,000 shares; none                           
          issued. Common stock, par value $.0001; authorized 17,000,000 shares;                          
          issued and outstanding                                                                         
          7,869,006 and 7,951,392 shares in 1999 and 1998                               1           1    
          Capital in excess of par value                                           33,751      34,073    
          Retained earnings                                                        10,888      19,376    
                                                                                 --------    --------    
                    Total stockholders' equity                                     44,640      53,450    
                                                                                 --------    --------    
Total Liabilities and Stockholders' Equity                                       $ 65,341    $ 70,848    
                                                                                 ========    ========    


See notes to financial statements.

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 Natural Wonders, Inc.
Statements of Cash Flows
(In thousands)

                                                        [Enlarge/Download Table]

                                                                                    Fiscal Year           
                                                                         -------------------------------- 
                                                                           1999         1998       1997   
                                                                         -------------------------------- 
Cash Flows From Operating Activities:                                                                     
                                                                                                          
     Net earnings (loss)                                                 $ (8,488)   $ (1,897)   $  1,368 
          Adjustments to reconcile net earnings (loss) to net cash from                                   
               operating activities:                                                                      
          Depreciation and amortization                                     7,248       7,269       6,174 
          Loss on disposal and impairment of long-lived assets              4,085         950          48 
          Deferred taxes                                                   (4,154)        130      (1,079)
          Changes in assets and liabilities:                                                              
               Merchandise inventories                                     (5,498)        477      (2,341)
               Prepaid expenses and other current assets                      435        (415)       (511)
               Prepaid income taxes                                            17      (1,403)            
               Trade accounts payable                                       4,164         503       2,822 
               Accrued compensation and related costs                                    (525)        302 
               Accrued liabilities                                           (294)       (599)        838 
               Income taxes payable                                                    (1,760)       (160)
               Deferred rent                                                 (567)       (244)       (218)
                                                                         --------    --------    -------- 
Net cash (used in) provided by operating activities                        (3,052)      2,486       7,243 

Cash Flows From Investing Activities:                                                                     
    Purchases of short-term investments                                               (21,381)    (18,100)
    Sales of short-term investments                                         7,380      27,401      22,600 
    Purchases of property and equipment                                    (5,837)     (6,049)     (8,362)
    Business acquisition                                                                             (738)
                                                                         --------    --------    -------- 
Net cash provided by (used in) investing activities                         1,543         (29)     (4,600)

Cash Flows From Financing Activities:                                                                     
     Principal payments on capital lease obligations                                   (1,327)     (1,789)
     Principal payments on long-term debt                                              (2,088)     (2,421)
     Purchase of treasury stock                                              (350)       (900)            
     Grant of treasury shares                                                              23             
     Short-term borrowings on bank line of credit                          84,717      54,000      33,900 
     Payments on bank line of credit                                      (84,717)    (54,000)    (33,900)
     Exercise of stock options and warrants                                               266         167 
     Net proceeds from sale of common stock                                    28          59          84 
                                                                         --------    --------    -------- 
Net cash used in financing activities                                        (322)     (3,967)     (3,959)

Net Decrease in Cash and cash equivalents                                  (1,831)     (1,510)     (1,316)

Cash and cash equivalents:                                                                                
     Beginning of year                                                      4,841       6,351       7,667 
                                                                         --------    --------    -------- 
     End of year                                                         $  3,010    $  4,841    $  6,351 
                                                                         ========    ========    ======== 

Supplemental Information Cash paid during year:                                                           
     Interest                                                            $    550    $    442    $    614 
     Income taxes                                                        $    132    $  1,857    $  2,083 

See notes to financial statements.

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 Natural Wonders, Inc.
Statements of Stockholders' Equity
 (In thousands, except share data)

                                                        [Enlarge/Download Table]


                                                                    Capital in                   Total    
                                               Common Stock         Excess of     Retained   Stockholders'
                                           Shares         Amount    Par Value     Earnings      Equity    
                                           ------         ------    ---------     --------      ------    
                                                                                                          
Balance, February 1, 1997                 7,986,846    $        1  $   34,250       19,905   $   54,156   
     Exercise of stock options               60,692                       167                       167   
     Tax benefit from exercise of stock                                                                   
        Options                                                            27                        27   
     Employee stock purchase plan            24,571                        84                        84   
     Net earnings                                                                    1,368        1,368   
                                         ----------    ----------  ----------   ----------   ----------   

Balance, January 31, 1998                 8,072,109             1      34,528       21,273       55,802   
     Exercise of stock options               99,592                       266                       266   
     Tax benefit from exercise of stock                                                                   
        Options                                                            97                        97   
     Employee stock purchase plan            15,743                        59                        59   
     Stock repurchase                      (243,552)                     (900)                     (900)  
     Grant of treasury shares                 7,500                        23                        23   
     Net loss                                                                       (1,897)      (1,897)  
                                         ----------    ----------  ----------   ----------   ----------   
Balance, January 30, 1999                 7,951,392             1      34,073       19,376       53,450   
     Employee stock purchase plan             8,419                        28                        28   
     Stock repurchase                       (90,805)                     (350)                     (350)  
     Net loss                                                                       (8,488)      (8,488)  
                                         ----------    ----------  ----------   ----------   ----------   
Balance, January 29, 2000                 7,869,006    $        1  $   33,751   $   10,888   $   44,640   
                                         ==========    ==========  ==========   ==========   ==========   

See notes to financial statements.

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Notes to Financial Statements                                                   

Note 1. Summary of Significant Accounting Policies                              

Business Natural Wonders (the Company) is a specialty retailer, which operates  
182 stores, primarily in mall locations, in 39 states. The Company's products   
are inspired by the wonders of science and nature, and include telescopes,      
minerals, gardening and outdoor products, educational toys and games and        
apparel.                                                                        

Fiscal Year The Company's fiscal year ends on the Saturday closest to January   
31. Fiscal years 1999, 1998 and 1997 ended January 29, 2000, January 30, 1999,  
and January 31, 1998, respectively. Fiscal 1999, 1998 and 1997 were 52 weeks.   

Estimates The preparation of financial statements in conformity with generally  
accepted accounting principles requires management to make estimates and        
assumptions that affect the reported amounts of assets and liabilities and      
disclosure of contingent assets and liabilities at the date of the financial    
statements and the reported amounts of revenues and expenses during the         
reporting period. Actual results could differ from those estimates.             

          Significant estimates used in the financial statements include the
estimates of (i) expected inventory markdowns, (ii) sales return reserves (iii) 
impairment of long-lived assets, and (iv) realizability of deferred tax assets. 
The amounts that the Company will ultimately incur or recover could differ      
materially from the Company's current estimates. The underlying estimates and   
facts supporting these estimates could change in 2000 or thereafter.            

Revenue Recognition Revenue is recognized at the point of sale, net of estimated
sales returns.                                                                  

Cash and Cash Equivalents The Company considers all highly liquid investment    
instruments with an original maturity of three months or less to be cash        
equivalents.                                                                    

Short-Term Investments Short-term investments consist of highly liquid          
investments with an original maturity greater than three months. The Company's  
short-term investments consist primarily of commercial paper and discount notes,
which have been classified as available for sale and are carried at fair value, 
which approximates cost. The Company's policy is to invest cash in excess of    
immediate operating and expansion needs in investment grade, highly liquid      
income producing investments. Investments in the instruments of a single entity 
are limited to the lesser of $5,000,000 or 20% of the market value of the       
portfolio.                                                                      

Merchandise Inventories Merchandise inventories are stated at lower of average  
cost or market. Merchandise inventory includes expenses associated with the     
acquisition and distribution of inventory. Inventory is recorded net of markdown
reserves and as such are management's best estimate. For fiscal year ended 1999,
the Company implemented a new policy to establish a sales return reserve as a   
part of merchandise inventories.                                                

Property and Equipment Property and equipment are stated at cost. Depreciation  
and amortization are computed using the straight-line method over the estimated 
useful life of the assets, which range from 3 to 10 years. Depreciation expense 
totaled $7,248,000, $7,269,000 and $6,174,000 for 1999, 1998, and 1997,         
respectively.                                                                   

Store Pre-Opening Costs Store pre-opening costs are expensed as incurred.       

Rent Expense Certain of the Company's operating leases contain predetermined    
fixed increases of the minimum rental rate during the initial term. For these   
leases, the Company recognizes the related rental expense on a straight-line    
basis over the lease term. The Company has recorded the difference between the  
amounts charged to operations and the amounts payable under the leases as       
deferred rent in the accompanying balance sheets.                               

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Income Taxes Income taxes are computed using the asset and liability method,    
under which deferred income taxes are provided for the temporary differences    
between the financial reporting basis and the tax basis of the Company's assets 
and liabilities.                                                                

Stock-Based Compensation The Company accounts for stock-based awards to         
employees and directors using the intrinsic value method in accordance with     
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to     
Employees." Accordingly, no compensation cost has been recognized for its fixed 
cost stock option plans or its employee stock purchase plan.                    

Impairment of Long-Lived Assets The Company periodically reviews its long-lived 
assets for impairment to determine whether any events or circumstances indicate 
that the carrying amount of the assets may not be recoverable based on expected 
future cash flows. In 1999 the Company recorded a charge of $3,240,000          
representing the impairment of certain long-lived store assets, primarily       
leasehold improvements (see Note 2).                                            

Comprehensive Income (Loss) The Company's comprehensive income (loss) for 1999, 
1998 and 1997 is equal to its net income (loss).                                

Derivative Instruments SFAS No. 133, "Accounting for Derivative Instruments and 
Hedging Activities", as delayed by SFAS No. 137, will be effective for the      
Company in fiscal 2001. SFAS No. 133 establishes accounting and reporting       
standards for derivative instruments embedded in other contracts, and hedging   
activities. It requires that an entity recognize all derivatives as either      
assets or liabilities in the statement of financial position and measure those  
instruments at fair value. The Company does not expect adoption of this new     
standard to have a significant impact on its financial statements.              

Note 2.  Fiscal 1999 Results of Operations and Management Plans for Fiscal 2000 

The Company has incurred significant operating losses and negative cash flows   
from operations. In 1999 and 1998, the Company had pre-tax net losses of        
$13,847,000 and $3,017,000, respectively, and in 1999 had net cash used in      
operating activities of $3,052,000.                                             

The Company has reviewed its plans to return the Company to profitability, as   
well as progress on executing those plans, with its lender. Fiscal 2000 will be 
the first full year of operations under new merchandising strategies implemented
by the Company during 1999. As a result of those strategies, merchandise        
inventories have increased $5,498,000 from $22,707,000 at January 29, 2000 to   
$28,205,000 at January 30, 2000. Management believes that the build-up of       
inventory levels with new merchandise is critical to the success of its plans.  

Another important component of the Company's plans addresses the profitability  
of the individual stores. During the fourth quarter of 1999, the Company        
completed an analysis of its portfolio of store leases. A group of unprofitable 
store locations was identified for closure, and the Company is now actively     
pursuing the termination or renegotiation of these lease agreements. A          
long-lived asset impairment reserve was established related to these locations, 
and outside resources have been retained to support this effort. Charges will be
incurred in 2000 in order to close some stores, but the amount of these charges 
is expected to be less than the operating cost savings from closing these       
stores.                                                                         

While there can be no assurance that the implementation of the Company's plans  
will enable it to return to profitability in 2000, the Company believes that its
existing cash and cash equivalents, combined with borrowings available under its
credit facility (see Note 3), will be sufficient for the Company to sustain its 
operations and meet its financial obligations through the end of the next fiscal
year.                                                                           

Note 3.  Bank Financing and Liquidity                                           

The Company entered into an amended and restated credit facility agreement with 
a commercial bank effective June 15, 1999 for the purpose of financing seasonal 
working capital needs. This line of credit is for a term of three years, with a 
maximum credit line of $30,000,000, and is provided by the same bank as the     
Company's previous credit facility agreement, together with an additional lender
acting as administrative agent.                                                 

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The line provides for revolving advances up to the lesser of 60% of the value of
eligible inventory, 80% of the net retail liquidation value of eligible         
inventory, or the maximum credit line. As of January 29, 2000, total            
availability under the line was $12,284,000, with no amount outstanding. The    
line includes up to $5,000,000 for the issuance of commercial and standby       
letters of credit. The line of credit must be fully repaid for a 30-day         
consecutive period between January 1 and February 15 each year. The Company has 
the option of choosing interest payable at a rate based on LIBOR plus 2.25% or a
rate equal to the bank's prime rate. The agreement contains restrictive         
covenants, which include maintaining certain minimum tangible net worth levels  
and requiring bank consent for the payment of dividends. As of January 29, 2000,
the Company was not in compliance with the tangible net worth covenant. The     
noncompliance was waived and the agreement was amended with a revised covenant. 
At the same time, the administrative agent assumed the commercial bank's        
participation. The agreement also includes certain prepayment penalties.        

Outstanding commercial and standby letters of credit as of January 29, 2000 and 
January 30, 1999 approximated $534,000 and $892,000, respectively.              

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Note 4. Stockholders' Equity and Benefit Plan                                   

Stock Option Plans                                                              

The Company has stock option plans, which allow for the granting of incentive   
and non-qualified stock options to employees and non-employee directors. There  
are 2,750,000 shares of common stock authorized for issuance under the plans.   
Stock options generally are granted at prices equal to the fair market value on 
the date of grant, vest over a period of three to five years, and expire in ten 
years. In addition, the Company granted 750,000 shares of common stock to       
certain executives at an exercise price of $3.625 during 1998. These options    
vest in different share amounts, upon achieving certain stock prices, which     
range from $8 per share to $28 per share. Any remaining unvested shares vest    
seven years after the date of the option grant. Accordingly, no compensation    
charge has been recognized for these option grants.                             

SFAS No. 123, "Accounting for Stock-Based Compensation," requires the disclosure
of pro forma net earnings and net earnings per share had the Company adopted the
fair value method as of the beginning of 1995. Under SFAS 123, the fair value of
stock-based awards is calculated through the use of option pricing models, even 
though such models were developed to estimate the fair value of freely tradable,
fully transferable options without vesting restrictions, which significantly    
differ from the Company's stock option awards. These models also require        
subjective assumptions, including future stock price volatility and expected    
time to exercise, which greatly affect the calculated values. The Company's     
calculations were made using the Black-Scholes option pricing model with the    
following weighted average assumptions: five year expected life from date of    
grant; stock volatility, 110.8% in 1999, 118.9% in 1998 and 64.5% in 1997;      
risk-free interest rates, 5.7% in 1999, 5.2% in 1998, and 6.2% in 1997; and no  
dividends during the expected term. The Company's calculations are based on a   
single option valuation approach and forfeitures are recognized as they occur.  
If the computed fair values of the 1999, 1998 and 1997 awards had been amortized
to expense over the vesting period of the awards, pro forma net earnings (loss) 
and net earnings (loss) per share would have been $(8.9) million (basic: $(1.13)
per share; diluted: $(1.13) per share) in fiscal 1999, $(2.2) million (basic:   
$(0.27) per share; diluted: $(0.27) per share) in fiscal 1998, and $1.2 million 
(basic: $0.15 per share; diluted: $0.14 per share) in fiscal 1997.              

Option activity under the plans is as follows:                                  

                                                        [Enlarge/Download Table]


                                                                                     Weighted       
                                                               Options                Average       
                                                              Outstanding         Exercise Price    
                                                         ---------------------  --------------------
                                                                                                    
Outstanding, February 1, 1997 (164,412 exercisable at a                                             
weighted average price of $7.33)                                      722,684                  4.54 
  Granted (weighted average fair value $3.09)                         328,400                  5.17 
  Canceled                                                          (266,217)                  4.90 
  Exercised                                                          (60,692)                  2.79 
                                                         ---------------------  --------------------
Outstanding, January 31, 1998 (253,520 exercisable at a                                             
weighted average price of $5.41)                                      724,175                  4.83 
  Granted (weighted average fair value $3.13)                         995,537                  3.73 
  Canceled                                                          (452,333)                  4.91 
  Exercised                                                          (99,592)                  2.67 
                                                         ---------------------  --------------------
Outstanding, January 30, 1999 (115,277 exercisable at a                                             
weighted average price of $6.21)                                    1,167,787                  4.06 
  Granted (weighted average fair value $2.21)                         178,650                  2.72 
  Canceled                                                          (124,096)                  4.38 
                                                         ---------------------  --------------------
Outstanding, January 29, 2000 (205,849 exercisable at a                                             
weighted average price of $5.16)                                    1,222,341                 $3.83 


There were 474,913 shares available for grant under the plan.                   

The following table summarizes additional information about stock options at    
January 29, 2000:                                                               

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                                                        [Enlarge/Download Table]

                           Options Outstanding                                           Options Exercisable          
                           -------------------                                           -------------------          

                                                     Weighted       Weighted                                          
                                                      Average        Average                               Weighted   
      Range of                                       Remaining      Exercise        Number                 Average    
  Exercise Prices          Number Outstanding        Life (Yrs)       Price       Exercisable           Exercise Price
  ---------------          ------------------        ----------       -----       -----------           --------------
                                                                                                                      
   $1.09 - $3.56                  172,048                9.06            2.32        37,010                   $2.90   
   $3.63 - $3.63                  750,000                8.67            3.63             -                       -   
   $3.75 - $4.50                  184,609                8.34            4.14        86,889                    4.09   
   $4.56 - $15.25                 115,684                6.53            6.88        81,950                    7.31   
-------------------------  ---------------      --------------   -------------  ------------     -------------------  

   $1.09 - $15.25               1,222,341                8.47           $3.83       205,849                   $5.16   

Stock Purchase Plan                                                             

The Company's employee stock purchase plan enables eligible employees to        
purchase Natural Wonders' common stock at the average market price on the first 
or the last day of each six month purchase period, whichever is lower. Employees
may authorize periodic payroll deductions of up to 10% of eligible compensation 
for common stock purchases, up to a maximum amount of 750 shares per six-month  
period. The total number of shares which may be issued under the plan is        
300,000. As of January 29, 2000, 175,175 shares have been issued.               

Stock Repurchase Program                                                        

In fiscal 1997 the Board of Directors of the Company authorized the repurchase  
of up to $2,000,000 of the Company's outstanding common stock. Beginning in     
February 1998, the Company began repurchasing stock and as of January 29, 2000  
had purchased 334,357 shares for a total of $1,250,000.                         

Benefit Plan                                                                    

The Company has available a defined contribution plan. Eligible employees may   
contribute 1% to 15% of their compensation and the Company matches 50% of the   
first 5% of such employee contributions up to $2,000 per year. Total Company    
contributions to the plan were approximately $132,000, $61,000, and $61,000 in  
1999, 1998, and 1997, respectively.                                             

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Note 5.     Income Taxes                                                        

The income tax provision (benefit) consists of the following:                   
(In thousands)                                                                  

                                                                [Download Table]

                                       Fiscal Year                         
             ------------------------------------------------------------- 
               1999                       1998                       1997  
             ------------------------------------------------------------- 
Current:                                                                   
                                                                           
    Federal  $(1,262)                   $(1,337)                   $ 1,451 
    State         57                         87                        431 
             -------                    -------                    ------- 
              (1,205)                    (1,250)                     1,882 
Deferred      (4,154)                       130                     (1,079)
             -------                    -------                    ------- 
Total        $(5,359)                   $(1,120)                   $   803 
             =======                    =======                    ======= 

A reconciliation of the statutory federal income tax rate with the Company's    
effective income tax rate is as follows:                                        

                                                        [Enlarge/Download Table]
                                                              Fiscal Year                 
                                           -----------------------------------------------
                                            1999                1998                 1997 
                                           -----------------------------------------------
                                                                                          
Statutory rate                              34.0%               34.0%                34.0%
State income taxes, net of federal income                                                 
  tax benefit                                4.7                 4.8                  6.5 
Non taxable interest                          --                (1.7)                (5.3)
Other                                         --                  --                  1.8 
                                            ----                ----                 ---- 
Effective tax rate                          38.7%               37.1%                37.0%
                                            ====                ====                 ==== 

The components of the net deferred tax asset at year-end are as follows:        
(In thousands)                                                                  

                                                        [Enlarge/Download Table]

                                                                          Fiscal Year                         
                                               -------------------------------------------------------------- 
                                                           1999                              1998             
                                               -------------------------------------------------------------- 
                                                  Current        Non-Current        Current       Non-Current 
                                               -------------------------------------------------------------- 
Deferred tax assets:                                                                                          
                                                                                                              
    Deferred rent                                                     $1,235                           $1,470 
    Merchandise inventories                          $457                               $292                  
    Accrued employee benefits                         375                                436                  
    Miscellaneous accruals                            256                183             587                  
    Basis in fixed assets                                              3,249                            1,816 
    Alternative minimum tax credits and other                            525             375                  
    Net operating loss carryforward                                    3,227                                  
                                               -----------      -------------     -----------     ------------
                                                    1,088              8,419           1,690            3,286 
                                               -----------      -------------     -----------     ------------

Deferred tax liabilities:                                                                                     
    State taxes and other                             500                712             634              201 

                                                                                  -----------     ------------
                                               -----------      -------------                                 
Net deferred tax asset                               $588             $7,707          $1,056           $3,085 
                                               ===========      =============     ===========     ============


No valuation allowance has been recorded at January 29, 2000 or January 30,     
1999. Management evaluated the need for such an allowance, and based on the     
Company's history of earnings and projected future profitability, determined    
that one was not necessary. Realization of deferred of tax assets is dependent  
upon generating sufficient taxable income prior to the expiration of related    
benefits. Although realization is not assured, management believes it is more   
likely than not that the deferred tax assets will be realized. The deferred tax 
assets considered realizable could be reduced if estimates of future taxable    
income during the carryforward periods are reduced.                             

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At January 29, 2000, the Company has federal and state net operating loss       
carryforwards of approximately $5,777,887 and $17,333,721, respectively, which  
expire between 2003 and 2019.                                                   

Note 6. Earnings Per Share Basic earnings per share is calculated based upon the
weighted average number of common shares outstanding, excluding common share    
equivalents, during the period. Diluted earnings per share is calculated based  
upon the weighted average number of shares outstanding plus common share        
equivalents during the period.                                                  

The following is a reconciliation of the Company's basic and diluted net income 
(loss) per share computations:                                                  

(Shares in thousands)                                                           

                                                        [Enlarge/Download Table]

                                                                       Fiscal Year                                             
                                  ---------------------------------------------------------------------------------------------
                                          1999                             1998                             1997               
                                  ---------------------------   -------------------------------     ---------------------------
                                                   Per                              Per                              Per       
                                                  Share                            Share                            Share      
                                      Shares     Amount               Shares       Amount              Shares      Amount      
                                  ----------- ---------------   ------------- -----------------     ---------- ----------------
                                                                                                                               
Basic EPS                              7,905         $(1.07)           8,014         $(0.24)            8,005       $0.17      
Effect of dilutive stock options                                                                          195           -      
                                  ----------- ---------------   ------------- -----------------     ---------- ----------------
Diluted EPS                            7,905         $(1.07)           8,014         $(0.24)            8,200       $0.17      
                                  =========== ===============   ============= =================     ========== ================

In 1999 and 1998, stock options did not have a dilutive effect on EPS because of
the net loss.                                                                   

The following options were not included in the computation of diluted EPS       
because such options' exercise price was greater than the average market price  
of the common shares:                                                           

                                                 Fiscal Year
                                                 -----------------------------
                                                1997
                                                 -----------------------------

Options to purchase shares of common stock                  213,000             
                                                 -----------------------------
Exercise prices                                         $5.13 - $15.25          
                                                 -----------------------------
Expiration dates                                          June 2003 -           
                                               November 2007

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Note 7. Commitments and Contingencies                                           

Leases                                                                          

The Company leases its office, distribution and retail facilities under         
operating leases expiring at dates from 2000 to 2010. Certain of the leases     
include renewal provisions at the Company's option. The Company also subleases  
space at various locations with both month-to-month and noncancelable sublease  
agreements.                                                                     

The Company leased fixtures and equipment under capital equipment leases during 
part of 1998 and prior years. All existing leases were bought out during 1998.  
Interest rates ranged from approximately 7.5% to 15.9%. Some of the leases were 
subject to fair market value buyout at the end of the initial lease term.       

The aggregate minimum annual rental payments and sublease income under          
noncancelable operating leases in effect at January 29, 2000 are as follows:    

(In thousands)                                                                  

                                                        [Enlarge/Download Table]

Fiscal Year                         Minimum            Sublease                          
                                     rent               income              Total        
                                 ----------------  -----------------  -------------------
                                                                                         
2000                                     $15,166               $201              $14,965 
2001                                      13,995                222               13,773 
2002                                      12,156                230               11,926 
2003                                      10,775                237               10,538 
2004                                       6,954                 80                6,874 
Thereafter                                19,660                  -               19,660 
                                 ----------------  -----------------  -------------------
Total minimum lease commitments          $78,706               $970              $77,736 
                                 ================  =================  ===================

All of the leases for the Company's retail stores contain clauses which provide 
for additional rent if sales exceed predetermined levels. The components of rent
expense for 1999, 1998 and 1997 were as follows (In thousands):                 

                                                        [Enlarge/Download Table]

                                                  1999                    1998                    1997   
---------------------------------------------------------------------------------------------------------
                                                                                                         
  Minimum and deferred rent             $         15,248        $         15,170        $         13,800 
  Percentage rent                                    170                     112                      80 
  Sublease income                                  (294)                   (278)                    (99) 
                                           --------------          --------------          --------------
  Total rent expense                    $         15,124        $         15,004        $         13,781 
                                           ==============          ==============          ==============

Accumulated amortization of property under capital leases as of January 31, 1998
was $2,768,000. During 1998 a number of capital leases expired, the related     
equipment was purchased and the balances reclassified to equipment. All         
remaining capital leases were bought out during 1998, the equipment returned or 
purchased and the balances reclassified to equipment or expensed.               

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Litigation                                                                      

In January 1998, a lawsuit was filed against the Company alleging that certain  
products sold by the Company infringed two patents of the plaintiff and sought  
injunctive relief, unspecified damages, and enhanced damages and attorneys fees.
In June 1998, the Company reached a negotiated settlement of this claim. The    
cost of the settlement, including legal expenses and reserves, was approximately
$525,000 and was recorded in the first quarter ended May 2, 1998.               

The Company is involved in other litigation in the ordinary course of its       
business. Management believes that the outcome of such litigation will not have 
a material adverse effect upon the Company's financial statements.              

Note 8. Acquisition                                                             

On May 22, 1997, the company acquired 12 locations through the acquisition of   
substantially all operating assets of What A World!, Inc. Inventory and store   
fixtures were the primary assets acquired and certain retail facility leases    
were assumed. The total purchase price, including acquisition costs, was        
$738,000 and was recorded using the purchase method of accounting.              

Note 9. Quarterly Financial Information (unaudited)                             

Summarized quarterly financial information for fiscal years 1999 and 1998 is as 
follows:                                                                        

                                                        [Enlarge/Download Table]

Fiscal Year 1999                                                                    Quarter Ended                                 
-------------------------------------------- -------------------------------------------------------------------------------------
                                                May 1, 1999         Jul. 31, 1999               Oct. 30, 1999    Jan. 29, 2000 (1)
                                             ------------------   ---------------------     -------------------- -----------------
(In thousands, except per share amounts)                                                                                          

                                                                                                                                  
Net sales                                            $21,552             $25,415                     $23,332           $76,790    
Gross margin                                           2,602               4,584                       5,733            25,687    
Net earnings (loss)                                  (4,359)             (3,959)                     (3,884)             3,714    
Basic earnings (loss) per share                      $(0.55)             $(0.50)                     $(0.49)             $0.47    
Diluted earnings (loss) per share                    $(0.55)             $(0.50)                     $(0.49)             $0.47    

Fiscal Year 1998                                                                 Quarter Ended                                    
-------------------------------------------- -------------------------------------------------------------------------------------
                                                May 2, 1998          Aug. 1, 1998               Oct. 31, 1998     Jan. 30, 1999   
                                             ------------------   ---------------------     -------------------- -----------------
(In thousands, except per share amounts)                                                                                          

Net sales                                            $23,265             $27,443                     $24,464           $74,648    
Gross margin                                           3,827               7,482                       5,678            26,670    
Net earnings (loss)                                  (4,576)             (1,569)                     (2,996)             7,245    
Basic earnings (loss) per share                      $(0.57)             $(0.19)                     $(0.38)             $0.91    
Diluted earnings (loss) per share                    $(0.57)             $(0.19)                     $(0.38)             $0.91    

(1) The Company recorded a charge of $3,240,000 representing the impairment of  
certain long-lived store assets in the fourth quarter of fiscal 1999.           

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INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders                                             
Natural Wonders, Inc.                                                           
Fremont, California                                                             

           We have audited the accompanying balance sheets of Natural Wonders,
Inc. (the Company) as of January 29, 2000 and January 30, 1999 and the related  
statements of operations, stockholders' equity and cash flows for each of the   
three years in the period ended January 29, 2000. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.                   

     We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit  
to obtain reasonable assurance about whether the financial statements are free  
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit    
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement       
presentation. We believe that our audits provide a reasonable basis for our     
opinion.                                                                        

        In our opinion, such financial statements present fairly, in all
material respects, the financial position of Natural Wonders, Inc. as of January
29, 2000 and January 30, 1999, and the results of its operations and its cash   
flows for each of the three years in the period ended January 29, 2000 in       
conformity with generally accepted accounting principles.                       

San Francisco, California                                                       
March 3, 2000                                                                   

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                                                                [Download Table]

Corporate Information                                                             

                                                                                  
Board of Directors                        Corporate Officers                      
Pearson C. Cummin III                     Peter G. Hanelt                         
Chairman of the Board of Directors,       Chief Executive Officer, Chief Financial
Natural Wonders, Inc.                     Officer and Director                    
General Partner,                                                                  
Consumer Venture Partners                 Kenneth G. Norton                       
                                          Executive Vice President,  General      
David Folkman                             Merchandising Manager                   
Director and Chief Executive Officer,                                             
On-Site Dental Care,                                                              
Inc.                                                                              
Principal, Regent Pacific Management                                              
Corporation                               William J. Soncini                      
                                          Senior Vice President, Operations       
Peter G. Hanelt                                                                   
Chief Executive Officer, Chief Financial  Denise A. Ellwood                       
Officer and Director,                     Vice President, Merchandising           
Natural Wonders, Inc.                                                             
                                          Debbie M. Wibbenmeyer                   
Bruce Beda                                Vice President, Merchandise             
Chief Executive Officer                   Planning and Allocation                 
Orion Partners LLC                                                                
                                          Michael L. Cape                         
Julius Jensen III                         Vice President, Marketing and Visual    
Managing General Partner,                                                         
Copley Venture Partners                   Catherine S. Klein                      
                                          Controller                              

                                          Corporate Headquarters                  
                                          4209 Technology Drive                   
                                          Fremont, California  94538              
                                          (510) 252-9600                          

                                          Register and Transfer Agent             
                                          BankBoston, N.A.                        
                                          c/o EquiServe                           
                                          P.O. Box 8218                           
                                          Boston, Massachusetts  02266-8218       
                                          (781) 575-3100                          

                                          Independent Auditors                    
                                          Deloitte & Touche LLP                   
                                          San Francisco, California               

                                          Annual Meeting                          

                                          The Annual Meeting of                   
                                          Shareholders will be held               
                                          Tuesday, May 23, 2000 at 9:00           
                                          a.m. (PDT) at the Company's             
                                          headquarters.                           

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                        Form 10K
                                            A copy of the Company's 1999
                                              Form 10K as filed with the SEC
                                              may be obtained without charge
                                              by calling or writing Investor
                                          Relations at the Company's
                             headquarters.

Market Information and Dividend Policy                                          

        Natural Wonders, Inc. common stock trades on the NASDAQ Stock Market
under the symbol NATW. Market price for the Company's stock for fiscal 1999 and 
1998 is as follows:                                                             

1999                                   High                             Low     
                                  ----                             ---
First Quarter                          4 5/8                            3 15/16 
Second Quarter                         4 1/8                            31/2    
Third Quarter                          4                                11/4    
Fourth Quarter                         2                                1 1/32  

1998                                   High                             Low     
                                  ----                             ---
First Quarter                          5 3/8                            3 15/16 
Second Quarter                         4 7/8                            3 7/8   
Third Quarter                          4 1/2                            2       
Fourth Quarter                         5 1/8                            3       

         As of February 29, 2000, there were approximately 250 stockholders of
record and 1,500 beneficial stockholders. The Company has never paid cash       
dividends on its capital stock and does not anticipate paying cash dividends in 
the foreseeable future.                                                         

store locations                                                                 

ALABAMA                                                                         
*Bel Air Mall                                                                   
ARIZONA                                                                         
Fiesta Mall                                                                     
Metrocenter                                                                     
Paradise Valley Mall                                                            
California                                                                      
Antelope Valley Mall                                                            
Arden Fair Shopping Center                                                      
Beverly Center                                                                  
Capitola Mall                                                                   
Coddingtown Mall                                                                
Del Amo Fashion Center                                                          
Galleria at South Bay                                                           

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Galleria at Tyler                                                               
Hilltop Mall                                                                    
La Cumbre Plaza                                                                 
Main Place/Santa Ana                                                            
Montclair Plaza                                                                 
NewPark Mall                                                                    
North County Fair                                                               
Northridge Fashion Center                                                       
Oakridge Mall                                                                   
Palm Desert Town Center                                                         
Santa Monica Place                                                              
Sherman Oaks Fashion Square                                                     
Stoneridge                                                                      
Stonestown Galleria                                                             
Sun Valley                                                                      
The Oaks                                                                        
The Promenade at Temecula Valley                                                
Topanga Plaza                                                                   
Valencia Town Center                                                            
Vallco Fashion Park                                                             
Valley Plaza Shopping Center                                                    
Westminster Mall                                                                
Westside Pavilion                                                               
Colorado                                                                        
Cherry Creek                                                                    
Park Meadows                                                                    
The Citadel                                                                     
Connecticut                                                                     
Greenwich                                                                       
Stamford Town Center                                                            
Westfarms                                                                       
Florida                                                                         
Aventura Mall                                                                   
Countryside Mall                                                                
De Soto Square                                                                  
Edison Mall                                                                     
Governor's Square                                                               
Orange Park Mall                                                                
Orlando Fashion Square                                                          
Paddock Mall                                                                    
Pembroke Lakes Mall                                                             
Regency Square                                                                  
Sarasota Square                                                                 
The Falls Shopping Center                                                       
The Gardens                                                                     
Treasure Coast Square                                                           
Tyrone Square                                                                   
West Shore Plaza                                                                
Georgia                                                                         
Cumberland Mall                                                                 
Gwinnett Place                                                                  
North Point Mall                                                                
Perimeter Mall                                                                  
Town Center at Cobb                                                             

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IDAHO                                                                           
Boise Towne Square                                                              
Illinois                                                                        
Mall at CherryVale                                                              
Fox Valley Center                                                               
Hawthorn Center                                                                 
Orland Square                                                                   
St. Clair Square                                                                
Stratford Square                                                                
Woodfield                                                                       
Yorktown Shopping Center                                                        
Indiana                                                                         
Castleton Square                                                                
Eastland Mall                                                                   
Glenbrook Square                                                                
Iowa                                                                            
*Coral Ridge Mall                                                               
Valley West Mall                                                                
Kansas                                                                          
Oak Park Mall                                                                   
Kentucky                                                                        
Fayette Mall                                                                    
Florence Mall                                                                   
Oxmoor Center                                                                   
Louisiana                                                                       
Cortana Mall                                                                    
Maine                                                                           
Maine Mall                                                                      
Maryland                                                                        
Annapolis Mall                                                                  
Lakeforest                                                                      
Montgomery Mall                                                                 
Towson Town Center                                                              
Massachusetts                                                                   
Burlington Mall                                                                 
Cambridgeside Galleria                                                          
Emerald Square                                                                  
Natick Mall                                                                     
Northshore Mall                                                                 
South Shore Plaza                                                               
Michigan                                                                        
Briarwood                                                                       
Fairlane Town Center                                                            
Genesee Valley Mall                                                             
Lansing Mall                                                                    
Meridian Mall                                                                   
RiverTown Crossings                                                             
Somerset North                                                                  
Twelve Oaks Mall                                                                
Woodland                                                                        
Minnesota                                                                       
Mall of America                                                                 
Ridgedale Shopping Center                                                       
Rosedale Shopping Center                                                        

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Missouri                                                                        
Battlefield Mall                                                                
Chesterfield Mall                                                               
Nevada                                                                          
Galleria at Sunset                                                              
Meadowood Mall                                                                  
New Hampshire                                                                   
Pheasant Lane Mall                                                              
The Mall at Rockingham Park                                                     
New Jersey                                                                      
Cherry Hill Mall                                                                
Deptford Mall                                                                   
Freehold Raceway Mall                                                           
Mall at Short Hills                                                             
Menlo Park Mall                                                                 
Monmouth Mall                                                                   
Quaker Bridge Mall                                                              
Rockaway Townsquare                                                             
Willowbrook Mall                                                                
New Mexico                                                                      
Coronado Center                                                                 
New York                                                                        
Boulevard Mall                                                                  
Roosevelt Field Mall                                                            
Smith Haven Mall                                                                
Staten Island Mall                                                              
North Carolina                                                                  
Cary Towne Center                                                               
Carolina Place                                                                  
Four Seasons Town Centre                                                        
Ohio                                                                            
Belden Village Mall                                                             
Columbus City Center                                                            
Dayton Mall                                                                     
Great Lakes Mall                                                                
Mall at Fairfield Commons                                                       
Tri-County Mall                                                                 
Tuttle Crossing                                                                 
Oklahoma                                                                        
Penn Square Mall                                                                
Woodland Hills Mall                                                             
Oregon                                                                          
Clackamas Town Center                                                           
Lloyd Center                                                                    
Valley River Center                                                             
Washington Square                                                               
Pennsylvania                                                                    
Capital City Mall                                                               
Granite Run Mall                                                                
Lehigh Valley Mall                                                              
Logan Valley Mall                                                               
Mall at Streamtown                                                              
Monroeville Mall                                                                
Ross Park Mall                                                                  

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South Hills Village                                                             
South Carolina                                                                  
Haywood Mall                                                                    
South DAKOTA                                                                    
*Empire Mall                                                                    
Tennessee                                                                       
Coolsprings Galleria                                                            
Hamilton Place                                                                  
Hickory Ridge Mall                                                              
West Town Mall                                                                  
Texas                                                                           
Barton Creek Square                                                             
Baybrook Mall                                                                   
Collin Creek Mall                                                               
NorthPark Center                                                                
Parks at Arlington                                                              
Vista Ridge Mall                                                                
West Oaks Mall                                                                  
Willowbrook Mall                                                                
Utah                                                                            
Fashion Place Mall                                                              
Provo Towne Center                                                              
Virginia                                                                        
Dulles Town Center                                                              
Fair Oaks                                                                       
MacArthur Center                                                                
Regency Square                                                                  
Springfield Mall                                                                
Tysons Corner Center                                                            
Washington                                                                      
Alderwood Mall                                                                  
Bellis Fair                                                                     
Northgate Shopping Center                                                       
South Hill Mall                                                                 
Southcenter Mall                                                                
Tacoma Mall                                                                     
Westlake Center                                                                 
West Virginia                                                                   
Charlestown Town Center                                                         
Wisconsin                                                                       
Southridge Mall                                                                 

* Opening in 2000                                                               

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                                                                         ANNEX E

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-K

( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES           
EXCHANGE ACT OF 1934                                                

For the fiscal year ended                 January 29, 2000                      
                      ----------------------------------------------------

(   ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES       
EXCHANGE ACT OF 1934                                                

For the transition period from                  to                              
                             ---------------      --------------------------

Commission file number:                      0-20035                            
                       -------------------------------------------------------

 NATURAL WONDERS, INC.
--------------------------------------------------
(Exact name of registrant as specified in its charter)

     Delaware                                           77-0141610
------------------------------                              ------------------  
State or other jurisdiction of                              (IRS Employer       
incorporation or organization                               Identification No.) 

    4209 Technology Drive, Fremont, California               94538
--------------------------------------------------------------------------------
         (Address of principal executive offices)               (Zip Code)

Registrant's telephone number, including area code         (510) 252-9600       
                                                  ----------------------------

Securities registered pursuant to Section 12(b) of the Act:  NONE               

Securities registered pursuant to section 12(g) of the Act: Common Stock, par   
                                                    value $.0001
                                                           -------------------
                                                            (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was     
required to file such reports), and (2) has been subject to such filing         
requirements for the past 90 days. Yes X___. NO___.                             

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405  
of Regulation S-K is not contained herein, and will not be contained, to be the 
best of registrant's knowledge, in definitive proxy or information statements   
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( X )                                                                

The aggregate market value of the voting stock held by non-affiliates of the    
Registrant, computed by reference to the average of the closing bid and ask     
prices of the Registrant's Common Stock as reported on NASDAQ Stock Market on   
March 31, 2000, was $10,041,285. The number of shares of Common Stock, with     
$.0001 par value, outstanding on March 31, 2000 was 7,837,406 shares.           

Documents incorporated by reference:                                            

Items 5, 6, 7 and 8 of Part II are incorporated by reference from the Company's 
1999 Annual Report to Stockholders. Items 10, 11, 12 and 13 of Part III are     
incorporated by reference from the Company's definitive Proxy Statement for the 
2000 Annual Meeting of Stockholders, to be held May 23, 2000. Registrant's      
definitive Proxy Statement was filed with the Securities and Exchange Commission
on April 14, 2000.                                                              

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PART I
Item 1. BUSINESS                                                                

General                                                                         

Natural Wonders, Inc. (the "Company), is a specialty gift retailer of unique and
affordable family gifts inspired by the wonders of science and nature. The      
Company's merchandise assortment includes telescopes, mineral carvings, globes, 
home and garden items, ceramics, wind chimes, hats and shirts, books, tapes,    
cd's, videos and a variety of interactive toys and games. Natural Wonders'      
merchandise is moderately priced and appeals to consumers' appreciation of the  
wonders of the world. Target customers are predominantly well educated, middle  
income families (adults ages 25 and up and children ages 6 to 12).              

Natural Wonders was incorporated in California on December 12, 1986, and        
reincorporated in Delaware on October 27, 1994. The Company operated 182 stores 
in 39 states at the end of fiscal 1999. In fiscal 1999, the Company opened 10   
stores with permanent locations, 9 permanent and 3 temporary stores were closed,
and 26 temporary stores were opened and 22 closed during the holiday season. At 
the end of 1999, 4 of the temporary locations remained opened and 3 will be     
moved to permanent locations in 2000. During the 2000 calendar year, the Company
plans to open approximately 6 new stores and, during the holiday season,        
approximately 25 temporary locations.                                           

Products and Merchandising                                                      

During fiscal 1999, the typical Natural Wonders' store stocked between 1,500 to 
2,000 different stock keeping units ("SKU's"). Specific quantities of           
merchandise are allocated according to the requirements of individual stores    
based upon a merchandise classification planning system. While items are offered
in a wide range of prices, a majority are priced below $25.00.                  

The following is a description of the Company's merchandise assortment by       
product category:                                                               

Kids & Discovery Educational and interactive toys and games: plush animals, glow
in the dark toys, flow-motion and kinetic sculpture products, decorative        
lighting, creativity and science kits and novelty toys.                         

Gifts Lighting, ceramics, home decorative, collectibles, kaleidoscopes,         
paperweights, globes and weather products.                                      

Garden Wind chimes, bird houses, bird feeders, herb nurseries, fountains,       
sundials and decorative garden accessories such as terracotta thermometers,     
clocks, and sculpture.                                                          

Apparel T-shirts, sweatshirts and hats for both adults and children, and        
accessories such as totes and backpacks.                                        

Geology Agate boxes and bookends, sandstone coasters, jade vases, carved mineral
figurines, fetishes, spheres and mineral games.                                 

Optics Telescopes and accessories, starfinders, binoculars, compasses and       
thermometers.                                                                   

Music, Videos and Books Compact discs and cassette tapes including instrumental 
New Age music or environmental sounds, world music and folk dance, and videotape
selections featuring nature and science and computer animated subjects.         
Educational, pictorial, activity and instructional books for adults and         
children.                                                                       

Jewelry Earrings, necklaces, rings, pins, bracelets, and watches.               

Stationary Magnets, pens, hi-tech desk and computer accessories, cards, notes   
and journals.                                                                   

Relaxation Personal care and relaxation products, home fragrance and comfort    
products.                                                                       

Natural Wonders' merchandise organization includes 4 product teams, consisting  
of senior product managers, a product support team, as well as senior           
merchandising planners and store planners in the planning and allocation teams. 
The Company currently purchases merchandise from over 650 vendors. These vendors
include artisans, craftsmen and importers, as well as larger manufacturers and  
distributors. In fiscal 1999, only one vendor accounted for more than 5% of the 
Company's merchandise purchases. Natural Wonders purchased 9% of its merchandise
from Meade Instruments Corporation. Prior to 1999, no one vendor accounted for  
more that 5% of the Company's merchandise purchases.                            

                                                                               2

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Store Opening Costs                                                             

In 2000, the Company estimates that the average cost for leasehold improvements,
furniture and fixtures will be $260,000 for each new store, before any landlord 
construction allowances. Capital expenditures for stores with temporary         
locations are expected to be minimal. Working capital requirements, primarily   
consisting of inventory purchases, are expected to average $110,000 for each new
store and $85,000 for stores with temporary locations. The average pre-opening  
costs per store, which are expensed as incurred, are estimated to be $11,000 for
new stores and $9,000 for stores with temporary locations.                      

Marketing                                                                       

Natural Wonders' marketing strategy is to create an atmosphere that generates   
excitement about the world of nature and science. The strategy includes theme   
presentations, which highlight a related group of products that tell a story    
about a specific place or activity. Marketing may also involve developing       
partnerships with non-profit organizations that support environmental and       
conservation efforts. Additionally, the Company has created a customer database 
that enables the Company to engage in special promotional and marketing programs
targeted at specific potential customer groups.                                 

Store Environment. Natural Wonders' stores are well lighted with glass          
storefronts designed to be visible and appealing from a distance. Inside the    
store, customers find a hands-on environment where they are encouraged to pick  
up and explore different products. For example, a store may demonstrate Natural 
Wonders' compact disc and cassette tape offerings of New Age, contemporary and  
instrumental music and a color monitor may display videotapes depicting science 
and nature themes from Natural Wonders' video collection.                       

Customer Service. The products that the Company sells are often enhanced by     
explanation, demonstration or story-telling. The Company seeks to offer         
knowledgeable and enthusiastic customer service supported by creative packaging 
and signage. Store personnel receive comprehensive in-house product and sales   
instruction administered by field personnel and are trained to engage customers 
in the fun and fascination of Natural Wonders' products.                        

Promotional Activities. The Company conducts selected promotional and public    
relations activities as well as customer loyalty programs designed to promote   
repeat business.                                                                

Distribution                                                                    

Natural Wonders' merchandise distribution strategy is to process a major portion
of its merchandise through a centralized facility located in Louisville,        
Kentucky. Pre-ticketed merchandise received from suppliers at this facility is  
inspected and warehoused for distribution to all stores. Orders are picked and  
shipped to the stores on a weekly basis throughout most of the year. During     
preparation for the holiday selling season, merchandise shipping activity       
increases substantially. The Company primarily uses common carriers to ship     
merchandise to its stores.                                                      

Information Systems                                                             

In February 1998, the Company completed the installation of a new management    
information system that integrates its merchandising, distribution, and         
financial systems. The new system provides detailed information about all       
aspects of product flow and sales, and includes a data warehouse that allows the
management of inventory by SKU and the analysis of store trends.                

Competition                                                                     

The specialty retail business is highly competitive. Within the nature and      
science segment of specialty retailing, the Company competes with The Nature    
Company and Discovery Channel stores, a subsidiary of The Discovery Channel,    
Inc., as well as many other national and regional specialty retailers such as   
Store of Knowledge and World of Science stores. The Company competes on the     
basis of product assortment, customer service, store location and attractiveness
of store design. Management believes that a moderately priced, high quality     
merchandise assortment, high level of customer service and open store design    
will enable it to compete effectively. Natural Wonders also competes with       
specific segments of a wide variety of department and specialty stores, many of 
which are larger and have substantially greater resources than the Company.     
There is no assurance that in the future the Company will not face greater      
competition from other national or regional retailers.                          

                                                                               3

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Seasonality and Quarterly Fluctuations                                          

The Company's business is subject to substantial seasonal variations in demand. 
Historically, a significant portion of the Company's sales and substantially all
of its net income have been realized during the fourth fiscal quarter (which    
includes the November/December holiday season), and levels of sales and net     
earnings have been significantly lower in the first three fiscal quarters,      
usually resulting in losses in these quarters. If for any reason the Company's  
comparable store sales are substantially below seasonal norms during the months 
of November and December, as was the case in 1998, the Company's annual results 
for the full fiscal year would be adversely affected. The Company's quarterly   
results of operations may fluctuate significantly as a result of comparable     
store sales levels, the timing of new store openings and the amount of revenue  
contributed by new stores.                                                      

Employees                                                                       

As of January 29, 2000, the Company had approximately 2,300 employees. A        
significant number of seasonal employees are hired during each holiday selling  
season. None of the Company's employees is represented by a labor union.        

Future Results                                                                  

This report contains forward-looking statements regarding, among other matters, 
the Company's future strategy, store opening plans, availability of financing   
and cash flows, merchandising strategy and growth. The forward-looking          
statements are made pursuant to the safe harbor provisions of the Private       
Securities Litigation Reform Act of 1995. Forward-looking statements address    
matters which are subject to a number of risks and uncertainties. In addition to
the general risks associated with the operation of specialty retail stores in a 
highly competitive environment, the success of the Company will depend on a     
variety of factors. The success of the Company's operations depends upon a      
number of factors relating to consumer spending, including economic conditions  
affecting disposable consumer income such as employment, business conditions,   
interest rates and taxation. The Company's continued growth also depends upon   
the demand for its products, which in turn is dependent upon various factors,   
such as the introduction and acceptance of new products and the continued       
popularity of existing products, as well as the timely supply of all            
merchandise.                                                                    

Item 2. PROPERTIES                                                              

The Company leases corporate offices in Fremont, California and a distribution  
facility in Louisville, Kentucky. The corporate facility lease expires in 2004  
and the distribution facility lease expires in 2014 with two five-year options  
to extend such lease. Management believes that the capacity of the corporate    
offices and distribution center will be sufficient for the foreseeable future.  

As of January 29, 2000, the Company operated 182 stores in 39 states occupying  
approximately 450,000 gross square feet of leased space. The average size of a  
Natural Wonders store is approximately 2,500 square feet. The Company leases all
of the stores with most lease terms ranging from 8 to 10 years and expiring     
between 2000 and 2009. Leases for the Company's stores typically contain        
provisions for percentage rental payments after a specified sales level has been
achieved.                                                                       

Item 3. LEGAL PROCEEDINGS                                                       

None                                                                            

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                     

No matters were submitted to a vote of security holders during the fourth       
quarter of fiscal 1999.                                                         

                                                                               4

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 PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS' MATTERS 

The information required by this item is incorporated by reference to the       
section entitled "Market Information and Dividend Policy" in the Company's 1999 
Annual Report to Stockholders for the fiscal year ended January 29, 2000 (the   
"1999 Annual Report").                                                          

Item 6. SELECTED FINANCIAL DATA                                                 

The information required by this item is incorporated by reference to the       
section entitled "Selected Financial Data" in the Company's 1999 Annual Report. 

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS 
OF OPERATIONS                                                   

The information required by this item is incorporated by reference to the       
section entitled "Management's Discussion and Analysis of Financial Condition   
and Results of Operation" in the Company's 1999 Annual Report.                  

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                             

The information required by this item is incorporated by reference to the       
Financial Statements and accompanying Notes in the Company's 1999 Annual Report.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND         
FINANCIAL DISCLOSURES                                           

None.                                                                           
PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                     

The information required by this item with respect to the Directors and         
Executive Officers of the Registrant is incorporated by reference to the        
definitive Proxy Statement for the Registrant's 2000 Annual Meeting of          
Stockholders.                                                                   

There are no family relationships among directors or executive officers of the  
Company. The executive officers are elected by and serve at the discretion of   
the Company's Board of Directors. The Company is dependent upon the efforts of  
its executive officers, the loss of whom could materially affect the Company's  
business, financial condition and results of operations.                        

The information concerning compliance with Section 16(a) of the Securities      
Exchange Act of 1934 is incorporated by reference to the definitive Proxy       
Statement for the Registrant's 2000 Annual Meeting of Stockholders.             

Item 11. EXECUTIVE COMPENSATION                                                 

The information required by this item is incorporated by reference to the       
definitive Proxy Statement for the Registrant's 2000 Annual Meeting of          
Stockholders.                                                                   

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT         

The information required by this item is incorporated by reference to the       
definitive Proxy Statement for the Registrant's 2000 Annual Meeting of          
Stockholders.                                                                   

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                         

The information required by this item is incorporated by reference in the       
definitive Proxy Statement for the Registrant's 2000 Annual Meeting of          
Stockholders.                                                                   

                                                                               5

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 PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K        

(a)    Financial Statements, Financial Statement Schedules, and Exhibits.       

1.  Financial Statements                                          

          The following Financial Statements of the Registrant and Independent
       Auditors' Report on such Financial Statements are incorporated by
    reference to the Company's 1999 Annual Report to Stockholders.

    Statements of Operations for fiscal years 1999, 1998, and 1997

Balance Sheets at January 29, 2000 and January 30, 1999   

         Statements of Stockholders' Equity for fiscal years 1999, 1998, and
1997                                                      

    Statements of Cash Flows for fiscal years 1999, 1998, and 1997

Notes to Financial Statements                             

Independent Auditors' Report                              

2.  Financial Statement Schedules                                 

       Schedules not listed above have been omitted because they are not
applicable or are not required.                                                 

3.  Exhibits                                                      

           A list of Exhibits required to be filed as part of this report is set
forth on pages 8 through 10 of this report.                                     

(b) Reports on Form 8-K                                                         

No reports on Form 8-K were filed with the Securities and Exchange Commission   
during the last quarter of fiscal 1999.                                         

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SIGNATURES

           Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.                       

Date:         April 25, 2000                NATURAL WONDERS, INC.               
                            (Registrant)

                  By:  /s/ Peter G. Hanelt
                                         -------------------------------------
                                       Chief Executive Officer, President,
                                         Chief Financial Officer, and Director

          Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the     
Registrant and in the capacities and on the date indicated.                     

                                                                [Download Table]

        Signature                                Title                       
        ---------                                -----                       
                                                                             
    /s/ Pearson C. Cummin III                                                
--------------------------------------                                       
        (Pearson C. Cummin III)         Chairman of the Board                

    /s/ Peter G. Hanelt                                                      
--------------------------------------                                       
        (Peter G. Hanelt)               Chief Executive Officer, President,  
                                        Chief Financial Officer, and Director
                                        (Principal Executive, Accounting and 
                                        Financial Officer)                   

    /s/ David Folkman                                                        
--------------------------------------                                       
        (David Folkman)                 Director                             

    /s/ Bruce Beda                                                           
--------------------------------------                                       
        (Bruce Beda)                    Director                             

    /s/ Julius Jensen III                                                    
--------------------------------------                                       
        (Julius Jensen III)             Director                             


Date:  April 25, 2000                                                           

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 INDEX TO EXHIBITS

                                                        [Enlarge/Download Table]


                                                                                Sequentially
Exhibit                                                                           Numbered  
Number                                 Description                                  Page    
------                                 -----------                                  ----    
                                                                                            
3.1      Certificate of Incorporation is incorporated by reference to Exhibit               
         3.1 of the Form 10-K for the fiscal year ended January 28, 1995                    
         ("1994 Form 10-K").                                                                

3.2      Amended and Restated By-Laws is incorporated by reference to Exhibit               
         3.2 of the 1994 Form 10-K.                                                         

4.1      Reference is made to Exhibits 3.1 and 3.2.                                         

4.2      Registration Rights Agreement dated July 20, 1990, among the Company               
         and certain holders of Preferred Stock, Common Stock and warrants to               
         purchase Preferred Stock is incorporated by reference to Exhibit 4.2               
         of the Company's Registration Statement on Form S-1, Commission No.                
         33-46821 as filed with the Securities and Exchange Commission on                   
         March 30, 1992, (the "S-1").                                                       

10.1*    Amended and Restated 1993 Omnibus Stock Plan is incorporated by                    
         reference to Exhibit 10.1 of the 1994 Form 10-K.                                   

10.2*    1992 Employee Stock Purchase Plan is incorporated by reference to                  
         Exhibit 10.12 of the Form 10-K for the fiscal year ended January 30,               
         1993 ("1992 Form 10-K").                                                           

10.3*    1993 Outside Directors Stock Option Plan is incorporated by reference              
         to Exhibit 10.13 of the 1992 Form 10-K.                                            

10.6     Lease Agreement, dated March 2, 1993, between the Company and John W.              
         Rooker is incorporated by reference to Exhibit 10.19 of the 1992 Form              
         10-K.                                                                              

10.11    First Amendment to Lease, dated April 29, 1993, between the Company                
         and John W. Rooker is incorporated by reference to Exhibit 10.28 of                
         the 1993 Form 10-K.                                                                

10.12    Second Amendment to Lease, dated May 11, 1993, between the Company                 
         and John W. Rooker is incorporated by reference to Exhibit 10.29 of                
         the 1993 Form 10-K.                                                                

10.13    Third Amendment to Lease, dated November 3, 1993, between the Company              
         and John W. Rooker is incorporated by reference to Exhibit 10.30 of                
         the 1993 Form 10-K.                                                                

10.14    Fourth Amendment to Lease, dated November 24, 1993, between the                    
         Company and John W. Rooker is incorporated by reference to Exhibit                 
         10.31 of the 1993 Form 10-K.                                                       

10.16    Corporate Office Lease Agreement dated June 9, 1994 between the                    
         Company and the Lincoln National Life Insurance Company is                         
         incorporated by reference to Exhibit 10.33 of the Form 10-Q for the                
         quarterly period ended July 30, 1994.                                              

10.21*   401(k) Plan Adoption Agreement, effective July 1, 1994 is                          
         incorporated by reference to Exhibit 10.38 of the 1994 Form 10-K.                  

10.22    Settlement Agreement, dated April 6, 1995, between the Company and                 
         The Nature Company is incorporated by reference to Exhibit 10.39 of                
         the 1994 Form 10-K.                                                                

         *Plan or agreement pursuant to which the Company's officers or                     
         directors have received compensation.                                              


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                                                                                Sequentially
Exhibit                                                                           Numbered  
Number                                 Description                                  Page    
------                                 -----------                                  ----    
                                                                                            
10.23*   Form of Director and Officer Indemnity Agreement is incorporated by                
         reference to Exhibit 10.40 of the 1994 Form 10-K.                                  

10.27*   Employment Agreement entered into on September 15,1997 between the                 
         Company and Kathleen M. Chatfield is incorporated by reference to                  
         Exhibit 10.27 of the 1997 Form 10-K.                                               

10.28    Credit Agreement entered into on July 1, 1998 between the Company and              
         Wells Fargo Bank, National Association is incorporated by reference                
         to Exhibit 10.28 of the 1998 Form 10-Q, for the quarterly period                   
         ended August 1, 1998.                                                              

10.28.1  Second Amendment to Credit Agreement, entered into on September 15,                
         1998 between the Company and Wells Fargo Bank, National Association                
         is incorporated by reference to Exhibit 10.28.1 of the 1998 Form                   
         10-K.                                                                              

10.28.2  Third Amendment to Credit Agreement, entered into on January 29, 1999              
         between the Company and Wells Fargo Bank, National Association is                  
         incorporated by reference to Exhibit 10.28.2 of the 1998 Form 10-K. .              
         10.28.3 Fourth Amendment to Credit Agreement, entered into on March                
         15, 1999 between the Company and Wells Fargo Bank, National                        
         Association is incorporated by reference to Exhibit 10.28.3 of the                 
         1998 Form 10-K. . 10.28.4 Amended and Restated Loan and Security                   
         Agreement entered into on June 15, 1999 among the Company, Wells                   
         Fargo Bank, National Association and Foothill Capital Corporation is               
         incorporated by reference to Exhibit 10.28.4 of the 1999 Form 10-Q,                
         for the quarterly period ended May 1, 1999.                                        

10.28.5  Amendment Number One to Amended and Restated Loan and Security                     
         Agreement entered into on June 15, 1999 among the Company, Wells                   
         Fargo Bank, National Association and Foothill Capital Corporation is               
         incorporated by reference to Exhibit 10.28.5 of the 1999 Form10-Q,                 
         for the quarterly period ended October 30, 1999.                                   

10.29*   Executive Employment Agreement entered into on September 29,1998                   
         between the Company and Kenneth G. Norton is incorporated by                       
         reference to Exhibit 10.29 of the 1998 Form 10-K.                                  

10.30*   Nonqualified Stock Option Agreement entered into on September 29,1998              
         between the Company and Kenneth G. Norton is incorporated by                       
         reference to Exhibit 10.30 of the 1998 Form 10-K.                                  

10.31*   Secured Promissory Note for Kenneth G. Norton, dated October 19, 1998              
         is incorporated by reference to Exhibit 10.31 of the1998 Form 10-K.                

10.32*   Nonqualified Stock Option Agreement entered into on September 29,1998              
         between the Company and Peter G. Hanelt is incorporated by reference               
         to Exhibit 10.32 of the 1998 Form 10-K.                                            

         *Plan or agreement pursuant to which the Company's officers or                     
         directors have received compensation.                                              

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                                                        [Enlarge/Download Table]


                                                                                 Sequentially
Exhibit                                                                            Numbered  
Number                                  Description                                  Page    
------                                  -----------                                  ----    
                                                                                             
10.33*    Nonqualified Stock Option Agreement entered into on September 29,1998              
          between the Company and David H. Folkman is incorporated by reference              
          to Exhibit 10.33 of the 1998 Form 10-K.                                            

10.33.1*  Amendment to Nonqualified Stock Option Agreement, entered into on                  
          April 2, 1999 between the Company and David H. Folkman is                          
          incorporated by reference to Exhibit 10.33.1 of the 1998 Form 10-K.                

13.1      1999 Annual Report to Stockholders.                                                

27.1      Financial Data Schedule - 1999                                                     

          *Plan or agreement pursuant to which the Company's officers or                     
          directors have received compensation.                                              

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INDEPENDENT AUDITORS' CONSENT                                                   

Board of Directors                                                              
Natural Wonders, Inc.                                                           
Fremont, California                                                             

We consent to the incorporation by reference in Registration Statements Nos.    
33-80017, 33-62380, 33-62388, 33-62390 333-63779, 333-65521 and 333-49021 of    
Natural Wonders, Inc. on Form S-8 of our report dated March 3, 2000,            
incorporated by reference in this Annual Report on Form 10-K of Natural Wonders,
Inc. for the year ended January 29, 2000.                                       

/s/ Deloitte & Touche, LLP                                                      

Deloitte & Touche, LLP                                                          
San Francisco, California                                                       
April 21, 2000                                                                  

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                                                                         ANNEX F

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 8-K

 Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934

Date of Report (Date of earliest event reported): May 23, 2000

 Natural Wonders, Inc.
(Exact name of Registrant as specified in its charter)

 Delaware                      0-20035              77-0141610
(State or other jurisdiction of      (Commission          (IRS Employer         
incorporation or organization)        File Number)        Identification No.)   

4209 Technology Drive, Fremont, California 94538
(Address of principal executive offices)
(Zip code)

510-252-9600
(Registrant's telephone number, including area code)

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Item 5. Other Events                                                            

       On May 23, 2000, Natural Wonders, Inc. announced that it has signed a
letter of intent with World of Science, Inc. Under the terms of the letter of   
intent, Natural Wonder will purchase all of the issued and outstanding common   
stock of World of Science.                                                      

A copy of the press release is attached as Exhibit A.       

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SIGNATURE 

Pursuant to the requirements of the Securities Exchange Act of 1934, the        
registrant has duly caused this report to be signed on its behalf by the        
undersigned thereunto duly authorized.                                          

Dated:  June 8, 2000                                                            
       NATURAL WONDERS, INC.
    (Registrant)

     /s/ Peter G. Hanelt
                        --------------------------------------
  Peter G. Hanelt,
                        Chief Executive Officer, President and
         Chief Financial Officer
                          (Signing on behalf of the registrant and
                                as Principal Accounting and Financial Officer)

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Exhibit A:                                                                      

FOR IMMEDIATE RELEASE                                                           

CONTACTS:    Peter G. Hanelt                                                    
Chief Executive Officer/CFO                           
Natural Wonders, Inc.                                 
(510) 252-6607                                        
www.naturalwonders.com                                

WORLD OF SCIENCE TO MERGE WITH
------------------------------
 NATURAL WONDERS
 ---------------

NATURAL WONDERS TO ADD 104 STORES AND OVER $60 MILLION IN REVENUE.              

            Fremont, CA - May 23, 2000-- Natural Wonders, Inc. (NASDAQ: NATW), a
leading specialty retailer of unique and affordable family gifts inspired by the
wonders of science and nature, and World of Science, Inc. (NASDAQ: WOSI),       
another leading retailer of a variety of traditional and distinctive science and
nature products, today announced that they have signed a letter of intent with  
regard to the purchase by Natural Wonders of all of the issued and outstanding  
stock of World of Science for $6.25 million, in cash, which equates to          
approximately $1.32 per share.                                                  

          The deal is expected to be completed at the beginning of the third
quarter, is subject to World of Science shareholder and regulatory approval and 
will be accounted for using the purchase accounting method.                     

            For the fiscal year ended January 29, 2000, Natural Wonders reported
$147.1 million in revenues and World of Science reported $61.1 million in       
revenues. As a result of the merger, Natural Wonders will have a store base of  
261 regular stores and 19 seasonal stores. Given the holiday store opening plans
for Natural Wonders and World of Science, the combined store count is expected  
to expand to approximately 300 stores by calendar year end.                     

          Peter G. Hanelt, CEO of Natural Wonders, Inc., said, "Because both
companies are well known for their strength in nature and science retailing, we 
are thrilled with the substantial merchandising and operating synergies. This   
partnership is a natural fit and will benefit our customers, employees, and     
shareholders. This merger will substantially increase our 2000 revenue base,    
improve our earnings potential and increase our number of stores. Within the    
important markets                                                               

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in the eastern half of the United States, this will approximately double our    
market presence. Moreover, we will seek to achieve significant operating and    
administrative synergies as we integrate the businesses."                       

   World of Science's CEO Fred H. Klaucke said, "As previously
announced, our company has been exploring alternatives to maximize shareholder  
value and we believe that this transaction satisfies that objective. The        
combination of these two companies will result in a formidable specialty        
retailer of science and nature products."                                       

          Natural Wonders CEO Hanelt will continue in his role as CEO. World
of Science CEO Klaucke will be extensively involved with the integration of the 
two companies.                                                                  

About Natural Wonders, Inc.                                                     

        Natural Wonders, Inc. is a specialty gift retailer of unique and
affordable family gifts inspired by the wonders of science and nature. The      
Company's merchandise assortment includes telescopes, mineral carvings, globes, 
home and garden items, ceramics, wind chimes, hats and shirts, books, tapes,    
cd's, videos, and a variety of interactive toys and games. Natural Wonder's     
merchandise is moderately priced and appeals to consumers' appreciation of the  
wonders of the world. Target customers are predominantly well educated, middle  
income families (adults ages 25 and up and children ages 6 to 12. Natural       
Wonders' marketing strategy is to create an atmosphere that generates excitement
about the world of nature and science. The strategy includes theme              
presentations, which highlight a related group of products that tell a story    
about a specific place or activity. Marketing may also involve developing       
partnerships with non-profit organizations that support environmental and       
conservation efforts.                                                           

About World of Science                                                          
            World of Science is a specialty retailer of a variety of traditional
and distinctive science and nature products. The Company's merchandising        
strategy emphasizes both the educational and entertainment values of its        
products.                                                                       

         Certain statements in this report, including statements regarding
the timing of the merger and its impact on revenue, growth and earnings, the    
accounting treatment for the merger, first quarter results and new store        
openings are forward-looking statements within the meaning of the Private       

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   Securities Litigation Reform Act. Actual results may differ
materially from those indicated in such statements due to a number of factors,  
including the ability to obtain all necessary consents and approvals for the    
merger; unanticipated operational challenges in connection with combining       
operations; delays in opening new stores; the ability to retain key personnel;  
the availability of capital to fund continuing operations of both companies and 
their affiliates; changes in consumer spending patterns and in demand for       
popular products; the ability to open and operate new stores on a profitable    
basis; and prevailing economic conditions. Additional information on factors    
that may affect the business and financial results of Natural Wonders or World  
of Science can be found in their filings with the Securities and Exchange       
Commission.                                                                     

            Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995: This press release contains certain forward-looking statements that
are subject to risks and uncertainties that could cause the Company's actual    
results to differ materially from management's current expectations. These      
factors include the Company's ability to purchase attractive and appropriate    
merchandise, changes in consumer demands and preferences, competition from other
retailers, and uncertainties generally associated with gift retailing. Other    
risk factors are detailed in the Company's Securities and Exchange Commission   
filings.                                                                        

 # # #

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                                                                         ANNEX G

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 FORM 10-Q

(X)        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES   
EXCHANGE ACT OF 1934                                      

 For the quarterly period ended April 29, 2000

( )        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES  
EXCHANGE ACT OF 1934                                      

Commission File Number 0-20035

 Natural Wonders, Inc.
(Exact name of Registrant as specified in its charter)

Delaware                                       77-0141610 
(State or other jurisdiction of               (IRS Employer Identification No.) 
incorporation or organization)                                                  

4209 Technology Drive, Fremont, California 94538
(Address of principal executive offices)
(Zip code)

510-252-9600
(Registrant's telephone number, including area code)

   Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange 
Act of 1934 during the preceding 12 months (or for such shorter period that the 
Registrant was required to file such reports), and (2) has been subject to such 
filing requirements for the past 90 days.                                       

YES   X              NO                   
-----                             

Common stock outstanding as of May 27, 2000:  7,848,288  shares of common stock.

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 NATURAL WONDERS, INC.
 ---------------------
 INDEX
 -----

                                                                [Download Table]


                                                                     Page Number

PART I.  FINANCIAL INFORMATION                                                  

Item 1.  Financial Statements (Unaudited)                                       
                                                                                
         Condensed Statements of Operations                             3       
         Quarters ended April 29, 2000 and May 1, 1999                          

         Condensed Balance Sheets                                       4       
         April 29, 2000, January 29, 2000 and May 1, 1999                       

         Condensed Statements of Cash Flows                             5       
         Three months ended April 29, 2000 and May 1, 1999                      

         Notes to Condensed Financial Statements                        6       

Item 2.  Management's Discussion and Analysis of                        7 - 10  
         Financial Condition and Results of Operations                          

PART II. OTHER INFORMATION                                              11      

Item 1.  Legal Proceedings - None                                               

Item 2.  Changes in Securities - None                                           

Item 3.  Defaults Upon Senior Securities - None                                 

Item 4.  Submission of Matters to a Vote of Security Holders - None             
Item 5.  Other Information - None                                               

Item 6.  Exhibits and Reports on Form 8-K                               11      

         Signature                                                      12      


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 NATURAL WONDERS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
 (Unaudited)

                                THREE MONTHS ENDED
                              --------------------
                                APRIL 29,     MAY 1,
                               2000         1999
                              --------    --------
Net sales                                    $ 23,273    $ 21,552               
Cost of goods sold and                                                          
store occupancy expenses                 19,002      18,950         
                              --------    --------
Gross margin                         4,271       2,602    
Selling, general & administrative expenses     10,362       9,613               
                              --------    --------
Operating loss                      (6,091)     (7,011)   

Interest expense (income) and other, net          152         (92)              
                              --------    --------
Loss before taxes                   (6,243)     (6,919)   
Income tax benefit                              2,416       2,560               
                              --------    --------
Net loss                          $ (3,827)   $ (4,359)   
                              ========    ========

Net loss per common share                                                       
basic:                                       $  (0.49)   $  (0.55)              

Weighted average common shares outstanding                                      
basic:                                          7,859       7,951               

Stores open at end of period                      178         178               

 See notes to condensed financial statements

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 NATURAL WONDERS, INC.
CONDENSED BALANCE SHEETS
(In thousands)
 (Unaudited)

                                                        [Enlarge/Download Table]

                                                       APRIL 29,   JANUARY 29,    MAY 1,
                                                        2000         2000         1999  
                                                      --------    --------    --------  
                                ASSETS                                                  
Current Assets:                                                                         
                                                                                        
      Cash and cash equivalents                       $     13    $  3,010    $    314  
      Short-term investments                                 0           0       3,188  
      Merchandise inventories                           29,619      28,205      22,600  
      Prepaid income taxes                               3,827       1,386       2,692  
      Prepaid expenses and other current assets          3,284       3,671       4,241  
                                                      --------    --------    --------  
                Total current assets                    36,743      36,272      33,035  
Property and Equipment:                                                                 
      Leasehold improvements                            22,798      22,759      30,500  
      Furniture, fixtures and equipment                 21,781      21,175      35,100  
                                                      --------    --------    --------  
                                                        44,579      43,934      65,600  
      Less accumulated depreciation and amortization   (24,213)    (22,757)    (39,322) 
                                                      --------    --------    --------  
                                                        20,366      21,177      26,278  
Other Assets                                             7,761       7,892       3,497  
                                                      --------    --------    --------  
Total Assets                                          $ 64,870    $ 65,341    $ 62,810  
                                                      ========    ========    ========  

               LIABILITIES AND STOCKHOLDERS' EQUITY                                     

Current Liabilities:                                                                    
      Trade accounts payable                          $  9,295    $ 12,664    $  6,426  
      Accrued compensation and related costs             1,664       2,300       1,726  
      Accrued liabilities                                2,418       2,743       2,055  
      Short-term borrowings                              7,833           0           0  
                                                      --------    --------    --------  
               Total current liabilities                21,210      17,707      10,207  
Deferred Rents                                           2,881       2,994       3,512  
Commitments and Contingencies                                                           
Stockholders' Equity:                                                                   
      Common stock, par value $.0001; authorized                                        
      17,000,000 shares; issued and outstanding                                         
      7,848,288; 7,869,006; 7,951,392 shares                 1           1           1  
      Capital in excess of par value                    33,717      33,751      34,073  
      Retained earnings                                  7,061      10,888      15,017  
                                                      --------    --------    --------  
               Total stockholders' equity               40,779      44,640      49,091  
                                                      --------    --------    --------  
Total Liabilities and Stockholders' Equity            $ 64,870    $ 65,341    $ 62,810  
                                                      ========    ========    ========  


 See notes to condensed financial statements

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                     NATURAL WONDERS, INC.
                    CONDENSED STATEMENTS OF CASH FLOWS
                    (Dollars in thousands)
                     (Unaudited)

                                                        [Enlarge/Download Table]

                                                                           THREE MONTHS ENDED         
                                                                           ------------------         
                                                                  APRIL 29, 2000           MAY 1, 1999
                                                                  --------------           -----------
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                 
                                                                                                      
    Net Loss                                                        $ (3,827)              $ (4,359)  
    Adjustments to reconcile net loss to                                                              
    net cash used in operating activities:                                                            
      Depreciation and amortization                                    1,456                  1,812   
      Change in operating assets and liabilities:                                                     
         Merchandise inventories                                      (1,414)                   107   
         Prepaid expenses and other assets                            (1,923)                (1,181)  
         Trade accounts payable                                       (3,369)                (2,074)  
         Accrued compensation and related costs                         (636)                  (574)  
         Accrued liabilities                                            (325)                  (982)  
         Deferred rent                                                  (113)                   (51)  
                                                                    --------               --------   
         Net cash used in operating activities                       (10,151)                (7,302)  

CASH FLOWS FROM INVESTING ACTIVITIES:                                                                 
   Sales of short-term investments                                         0                  7,380   
   Purchases of property and equipment                                  (645)                (1,417)  
                                                                    --------               --------   
         Net cash (used in)/provided by investing activities            (645)                 5,963   

CASH FLOWS FROM FINANCING ACTIVITIES:                                                                 
   Net borrowing on line of credit                                     7,833                      0   
   Purchase of treasury stock                                            (46)                     0   
   Issuance of common stock under employee stock purchase program         12                      0   
                                                                    --------               --------   
         Net cash provided by financing activities                     7,799                      0   

NET DECREASE IN CASH AND CASH EQUIVALENTS                             (2,997)                (1,339)  

CASH AND CASH EQUIVALENTS:                                                                            
   Beginning of year                                                   3,010                  4,841   
                                                                    --------               --------   
   End of period                                                    $     13               $  3,502   
                                                                    ========               ========   

CASH PAID DURING PERIOD:                                                                              
   Interest                                                         $    151               $      5   
   Income taxes                                                     $     25               $      0   


 See notes to condensed financial statements

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 NATURAL WONDERS, INC.
 ---------------------

NOTES TO CONDENSED FINANCIAL STATEMENTS AS OF APRIL 29, 2000 AND MAY 1, 1999 AND
FOR THE THREE MONTH PERIODS ENDED APRIL 29, 2000 AND MAY 1, 1999                

1.      The financial statements are unaudited and reflect all adjustments      
       (consisting only of normal recurring adjustments) which, in the opinion
     of management, are necessary for a fair presentation of the financial
      position, operating results, and cash flows for the periods presented.
      The results of operations for the quarter ended April 29, 2000 are not
   necessarily indicative of the results to be expected for the entire
      fiscal year ending February 3, 2001. This financial information should
      be read in conjunction with the audited financial statements and notes
        thereto included in the Company's 1999 Annual Report to Stockholders and
      Form 10-K for the fiscal year ended January 29, 2000 as filed with the
Securities and Exchange Commission.                             

2.      The Company entered into an amended and restated credit facility        
  agreement with a commercial bank, effective June 15, 1999, for the
        purpose of financing seasonal working capital needs. This line of credit
        is for a term of three years, with a maximum credit line of $30,000,000,
     and is provided by the same bank that provided the Company's previous
       credit facility agreement, together with an additional lender acting as
        administrative agent. The line provides for revolving advances up to the
       lesser of 60% of the value of eligible inventory, 80% of the net retail
       liquidation value of eligible inventory, or the maximum credit line. As
     of April 29, 2000, total availability under the line was $10,788,000,
       with $7,833,000 outstanding. The line includes up to $5,000,000 for the
        issuance of commercial and standby letters of credit. The line of credit
      must be fully repaid for a 30-day consecutive period between January 1
 and February 15 each year. The Company has the option of choosing
       interest payable at a rate based on LIBOR plus 2.25% or a rate equal to
    the bank's prime rate. The agreement contains restrictive covenants,
       which include maintaining certain minimum tangible net worth levels and
      requiring bank consent for the payment of dividends. As of January 29,
   2000, the Company was not in compliance with the tangible net worth
    covenant. The noncompliance was waived and the agreement was amended
   with a revised covenant. At the same time, the administrative agent
      assumed the commercial bank's participation. As of April 29, 2000, the
       Company was in compliance with the revised tangible net worth covenant.
The agreement also includes certain prepayment penalties.       

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PART I.     FINANCIAL INFORMATION                                               

Item 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND     
RESULTS OF OPERATIONS.                                  

Results of Operations                                                           

General                                                                         

       As of April 29, 2000, Natural Wonders operated 178 stores in 39
states compared to 178 stores in 36 states as of May 1, 1999. During the first  
three months of 2000, four stores were closed (one temporary store and three    
permanent stores) as compared to one new store opened and three stores closed   
(one temporary store, one permanent store and one for remodeling) in the first  
three months of fiscal 1999.                                                    

Recent Development                                                              

          On May 23, 2000, Natural Wonders, Inc. announced that it had
signed a letter of intent with World of Science, Inc. Under the terms of the    
letter of intent, Natural Wonders will purchase all of the issued and           
outstanding common stock of World of Science for $6.25 million, in cash, which  
equates to approximately $1.32 per share. Funding alternatives are currently    
being evaluated. The deal is expected to be completed at the beginning of the   
third quarter, is subject to World of Science shareholder and regulatory        
approval and will be accounted for using the purchase accounting method. A copy 
of the letter is attached as Exhibit 10.34.                                     

Sales                                                                           

            During the first quarter of 2000, sales increased 8.1% over the same
period in 1999. The increase was primarily due to the increase in comparable    
store sales. Comparable store sales increased 5.4% in the first quarter of 2000,
as compared to the same period in 1999. The increase in the first quarter was   
primarily attributable to the impact of merchandise assortment changes.         

Cost of Goods Sold and Store Occupancy Expenses                                 

            Cost of goods sold and store occupancy expenses include distribution
center costs and other expenses associated with acquiring inventory. As a       
percentage of sales, these costs decreased to 81.6% in the first quarter of 2000
from 87.9% in the first quarter of 1999. The decrease in costs as a percentage  
of sales in the first quarter was primarily due to the impact of the improvement
in comparable store sales on store occupancy fixed expenses as well as improved 
product margins.                                                                

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Selling, General and Administrative Expenses                                    

           Selling, general and administrative expenses, (SG&A), are primarily
non-occupancy store expenses and corporate overhead. As a percentage of sales,  
these costs decreased slightly to 44.5% in the first quarter of 2000 from 44.6% 
in the first quarter of 1999.                                                   

Operating Income                                                                

          As a result of the foregoing, the operating loss was $6,091,000 or
26.2% of sales in the first quarter of 2000 versus $7,011,000 or 32.5% of sales 
in the first quarter of 1999.                                                   

Interest Expense (Income) and Other, Net                                        

           Interest expense (income) and other, net increased to 0.7% of sales
in the first quarter of 2000 from (0.4)% of sales in the first quarter of 1999. 
The increase was due to the use of the bank line in the first quarter of 2000,  
as opposed to interest income from investments in the first quarter of 1999.    

Net Loss                                                                        

          As a result of the foregoing, the net loss decreased to $3,827,000
or 16.4% of sales in the first quarter of 2000 from $4,359,000 or 20.2% of sales
in the first quarter of 1999.                                                   

Liquidity and Capital Resources                                                 
-------------------------------                                                 

     Seasonal working capital requirements have been met primarily
through short-term bank borrowings.                                             

         At April 29, 2000, cash and investments decreased $2,997,000 from
prior year-end. This was primarily due to seasonal operating losses,            
historically incurred in the first three fiscal quarters.                       

 Compared to the first quarter in the prior year, cash and
investments decreased due to lower accounts payable and higher merchandise      
inventories. The lower inventory level of prior year was primarily attributable 
to the merchandise assortment transition in process. This was offset in part by 
lower seasonal operating losses and purchasing less equipment.                  

            In fiscal 2000, the Company plans to open approximately 4 new stores
and, during the holiday season, approximately 25 stores in temporary locations. 
The Company anticipates that cash in 2000 will primarily be used for capital    
expenditures and merchandise inventory for new stores and temporary locations,  
and to purchase inventory for the Company's existing stores, particularly prior 
to and during the peak holiday selling season. Additionally, in fiscal 1997 the 
Board of Directors of the Company authorized the repurchase of up to $2,000,000 
of Natural Wonders outstanding common stock. As of April 29, 2000, the Company  
had repurchased 365,957 shares of Natural Wonders common stock at a total cost  
of $1,297,000.                                                                  

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        The Company entered into an amended and restated credit facility
agreement with a commercial bank, effective June 15, 1999, for the purpose of   
financing seasonal working capital needs. This line of credit is for a term of  
three years, with a maximum credit line of $30,000,000, and is provided by the  
same bank that provided the Company's previous credit facility agreement,       
together with an additional lender acting as administrative agent. The line     
provides for revolving advances up to the lesser of 60% of the value of eligible
inventory, 80% of the net retail liquidation value of eligible inventory, or the
maximum credit line. As of April 29, 2000, total availability under the line was
$10,788,000, with $7,833,000 outstanding. The line includes up to $5,000,000 for
the issuance of commercial and standby letters of credit. The line of credit    
must be fully repaid for a 30-day consecutive period between January 1 and      
February 15 each year. The Company has the option of choosing interest payable  
at a rate based on LIBOR plus 2.25% or a rate equal to the bank's prime rate.   
The agreement contains restrictive covenants, which include maintaining certain 
minimum tangible net worth levels and requiring bank consent for the payment of 
dividends. As of January 29, 2000, the Company was not in compliance with the   
tangible net worth covenant. The noncompliance was waived and the agreement was 
amended with a revised covenant. At the same time, the administrative agent     
assumed the commercial bank's participation. As of April 29, 2000, the Company  
was in compliance with the revised tangible net worth covenant. The agreement   
also includes certain prepayment penalties.                                     

         The Company believes that current cash and short-term investments
together with its cash flow from operations and funds available under its credit
facilities will be sufficient to fund the Company's operations for the next 12  
months.                                                                         

INFLATION AND SEASONALITY                                                       
-------------------------                                                       

  The Company does not believe that its operations have been
materially affected by inflation during recent years. However, there is no      
assurance that its business will not be affected by inflation in the future.    

            The Company's business is subject to substantial seasonal variations
in demand. Historically, a significant portion of the Company's sales and       
substantially all of its net earnings have been realized during the fourth      
quarter (which includes the November/December holiday season), and levels of    
sales and net earnings have been significantly lower in the first three         
quarters, usually resulting in losses in these quarters. If for any reason the  
Company's sales were substantially below seasonal norms during the months of    
November and December, as was the case in 1998, the Company's annual results    
would be adversely affected. The Company's quarterly results of operations may  
fluctuate significantly as a result of comparable store sales levels, the timing
of new store openings and the amount of revenue contributed by new stores.      

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FUTURE RESULTS                                                                  
--------------                                                                  

        This report contains forward-looking statements regarding, among
other matters, the Company's future strategy, store opening and closing plans,  
availability of financing and cash flows, merchandising strategy and growth. The
forward-looking statements are made pursuant to the safe harbor provisions of   
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
address matters which are subject to a number of risks and uncertainties. In    
addition to the general risks associated with the operation of specialty retail 
stores in a highly competitive environment, the success of the Company will     
depend on a variety of factors. The success of the Company's operations depends 
upon a number of factors relating to consumer spending, including economic      
conditions affecting disposable consumer income such as employment, business    
conditions, interest rates and taxation. The Company's continued growth also    
depends upon the demand for its products, which in turn is dependent upon       
various factors, such as the introduction and acceptance of new products and the
continued popularity of existing products, as well as the timely supply of all  
merchandise. Reference is made to the Company's filings with the Securities and 
Exchange Commission for further discussion of risks and uncertainties regarding 
the Company's business.                                                         

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PART II.    OTHER INFORMATION                                                   

Item 6.     Exhibits and Reports on Form 8-K                                    

a.          Exhibits                                                            

        Exhibit 10.34:    Letter of intent to purchase World or Science,
                             Inc., signed and acknowledged by Natural Wonders,
                           Inc. and World of Science, Inc. on May 23, 2000

Exhibit 11.1:     Computation of Per Share Loss         

Exhibit 27:       Financial Data Schedule               

b.          Reports on Form 8-K                                                 

     The Company filed a report on Form 8-K on June 8, 2000, which
         included a copy of a press release dated May 23, 2000, announcing
     the signing of a letter of intent with World of Science, Inc.
    wherein Natural Wonders would purchase all of the issued and
outstanding common stock of World of Science.           

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 SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the        
registrant has duly caused this report to be signed on its behalf by the        
undersigned thereunto duly authorized.                                          

Dated:  June 12, 2000                                                           
   NATURAL WONDERS, INC.
(Registrant)

 /s/ Peter G. Hanelt
                    --------------------------------------
Peter G. Hanelt,  
     Chief Executive Officer
President         
     Chief Financial Officer
                      (Signing on behalf of the registrant and
                            as Principal Accounting and Financial Officer)

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                                                                    Exhibit 11.1

 NATURAL WONDERS, INC.
 COMPUTATION OF PER SHARE NET LOSS
 (Shares in thousands)

                                                                [Download Table]

                                                Quarter Ended      
                                                -------------      
                                       April 29, 2000   May 1, 1999
                                       --------------   -----------
                                                                   
Net loss                                  $(3,827)       $(4,359)  
                                          =======        =======   

Weighted average common shares                                     
       Outstanding, basic and diluted       7,859          7,951   

Per share net loss, basic and diluted     $ (0.49)       $ (0.55)  
                                          =======        =======   


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PROXY 

WORLD OF SCIENCE, INC.  

900 JEFFERSON ROAD, BUILDING FOUR 
ROCHESTER, NEW YORK 14623 

PROXY SOLICITED BY THE BOARD OF DIRECTORS OF  
WORLD OF SCIENCE, INC. FOR THE  
SPECIAL MEETING OF STOCKHOLDERS 
TO BE HELD ON ___________, 2000 

The undersigned hereby constitutes and appoints Fred H. Klaucke and Richard B.  
Callen, and each of them, as proxies (the "Proxies") of the undersigned, with   
full power of substitution in each, and authorizes each of them to represent and
to vote all shares of common stock, par value $0.01 per share, of World of      
Science, Inc. ("World of Science") held of record by the undersigned as of the  
close of business on _________, 2000, at the Special Meeting of Stockholders    
(the "Special Meeting") to be held at _________________________________________,
Rochester, New York, on ________, 2000 at _______ a.m. local time and at any    
adjournments or postponements thereof.                                          

When properly executed, this proxy will be voted in the manner directed herein  
by the undersigned stockholder(s).  If no direction is given, this proxy will be
voted FOR the proposal set forth in Paragraph 1 on the reverse side hereof.  The
Proxies are each authorized to vote upon such other business as may properly    
come before the Special Meeting and any adjournment or postponement thereof.    
Stockholders who plan to attend the Special Meeting may revoke their proxy by   
casting their vote at the meeting in person.                                    

The undersigned hereby acknowledge(s) receipt of a copy of the accompanying     
Notice of Special Meeting of Stockholders and the Proxy Statement with respect  
thereto and hereby revoke(s) any proxy or proxies heretofore given.             

PLEASE VOTE, DATE AND SIGN THIS PROXY ON REVERSE SIDE AND 
RETURN PROMPTLY IN ENCLOSED ENVELOPE. 

[X]  PLEASE MARK VOTE                                                           
AS IN THIS EXAMPLE                                                    

                                             FOR     AGAINST   ABSTAIN

1.   To approve the Agreement and Plan of Merger  [_]       [_]       [_]       
dated as of August 2, 2000, by and among                              
Natural Wonders, Inc., Merger Sub and World                           
of Science, Inc. providing for the merger of                          
Merger Sub with and into World of Science                             
with World of Science being the surviving                             
corporation.                                                          

2.   To consider and act upon such other matters                                
as may properly come before the Special                               
Meeting and any adjournments or                                       
postponements thereof.                                                

                  ________________________________

Please be sure to sign and date this Proxy.                                     

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Date:________________________                                                   

Stockholder(s) signature(s):                                                    

_________________________________________________________________               

_________________________________________________________________               

Please sign name exactly as shown on reverse.  Where there is more than one     
holder, each should sign.  When signing as an attorney, administrator, executor,
guardian or trustee, please add your title as such.  If executed by a           
corporation or partnership, the proxy should be executed in the full corporate  
or partnership name and signed by a duly authorized person, stating his or her  
title or authority.                                                             

PLEASE, SIGN, DATE AND PROMPTLY MAIL YOUR PROXY.  

Dates Referenced Herein   and   Documents Incorporated by Reference

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